Wildhorse Center is an experienced home appliance dealer. Wildhorse Center also offers a number of services for the home appliances that it sells. Assume that Wildhorse Center sells ovens on a standalone basis. Wildhorse Center also sells installation services and maintenance services for ovens. However, Wildhorse Center does not offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for ovens is as follows. Oven only $820 Oven with installation service $830 Oven with maintenance services. $980 Oven with installation and maintenance services $891 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $160. Additionally, the incremental amount charged by Wildhorse Center for installation approximates the amount charged by independent third parties. Ovens are sold subject to a general right of return. If a customer purchases an oven with installation and/or maintenance services, in the event Wildhorse Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $820. Assume that a customer purchases an oven with both installation and maintenance services for $891. Based on its experience, Wildhorse Center believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately (i.e., the three components are distinct). (b) Indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract. (Do not round intermediate calculations. Round final answers to O decimal places, e.g. 5,275.)
Wildhorse Center is an experienced home appliance dealer. Wildhorse Center also offers a number of services for the home appliances that it sells. Assume that Wildhorse Center sells ovens on a standalone basis. Wildhorse Center also sells installation services and maintenance services for ovens. However, Wildhorse Center does not offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for ovens is as follows.
Oven only $820
Oven with installation service $830
Oven with maintenance services. $980
Oven with installation and maintenance services $891
In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $160. Additionally, the incremental amount charged by Wildhorse Center for installation approximates the amount charged by independent third parties. Ovens are sold subject to a general right of return. If a customer purchases an oven with installation and/or maintenance services, in the event Wildhorse Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $820.
Assume that a customer purchases an oven with both installation and maintenance services for $891. Based on its experience, Wildhorse Center believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately (i.e., the three components are distinct).
(b) Indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract. (Do not round intermediate calculations. Round final answers to O decimal places, e.g. 5,275.)
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