INTERMEDIATE ACCOUNTING ACCESS 540 DAY
10th Edition
ISBN: 9781264706327
Author: SPICELAND
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 6, Problem 6.23BE
Estimating stand-alone selling prices; residual approach
• LO5–6
O’Hara Associates sells golf clubs, and with each sale of a full set of clubs provides complementary club-fitting services. A full set of clubs with the fitting services sells for $1,500. O’Hara sells the same clubs without the fitting service for $1,400. Assuming that the golf clubs and the club-fitting services are separate performance obligations, estimate the stand-alone selling price of the club fitting services using the residual approach.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
PROBLEM 8. The Color Company manufactures and sells two
products. The selling prices and variable costs of the products
are as follows:
Blujets Blupens
P20
Selling prices
Variable costs
P40
8
24
The sales for 2021 were in the ratio of 3 Blujets to 1 Blupen.
Sales volume for 2021 was P1 million. Fixed costs for 2020
amounted to P390,000.
Requirements:
4. If the sales mix was to change to 2 units of blujets to 1 unit
of Blupen, would this have any effect on the breakeven
sales? If so, what would be the new breakeven sales?
5. Assuming that the sales volume would remain at P1
million, what net income would be generated using the
sales mix in number (4) above?
6. What sales revenue would be required if the firm wishes to
generate a net income of P328,900 if the original mix of 3:1
prevailed?
QUESTION 1
If the mark-up on cost is 20%, please and the selling price(Excl. VAT) is R600, which of the following amounts is the correct Cost Price(Excl. VAT)?
O A. R100
OB. R580
O C. R575
O D. R500
QUESTION 2
Which one of the following statements with respect to VAT is false?
O A. There is no indication of a VAT charge next to zero-rated item listed on an invoice.
O B. In general, no input VAT claim is allowed by SARS on the purchase of a double-cab delivery vehicle.
O C. The buyer of zero rated supplies will not get any refund from SARS for buying usch an item.
O D. If a vendor sells only VAT exempt supplies, it may not register for VAT.
PROBLEM 8. The Color Company manufactures and sells two
products. The selling prices and variable costs of the products
are as follows:
Blujets
Blupens
Selling prices
Variable costs
P20
P40
8
24
The sales for 2021 were in the ratio of 3 Blujets to 1 Blupen.
Sales volume for 2021 was P1 million. Fixed costs for 2020
amounted to P390,000.
Requirements:
1. Compute the number of units sold in 2021 for each
product.
2. Compute the breakeven sales in pesos and in units.
3. Compute the composite breakeven for the company.
Chapter 6 Solutions
INTERMEDIATE ACCOUNTING ACCESS 540 DAY
Ch. 6 - What are the five key steps a company follows to...Ch. 6 - What indicators suggest that a performance...Ch. 6 - What criteria determine whether a company can...Ch. 6 - We recognize service revenue either at one point...Ch. 6 - What characteristics make a good or service a...Ch. 6 - Prob. 6.6QCh. 6 - What must a contract include for the contract to...Ch. 6 - How might the definition of probable affect...Ch. 6 - When a contract includes an option to buy...Ch. 6 - Prob. 6.10Q
Ch. 6 - Prob. 6.11QCh. 6 - Is a customers right to return merchandise a...Ch. 6 - Prob. 6.13QCh. 6 - Under what circumstances should sellers consider...Ch. 6 - When should a seller view a payment to its...Ch. 6 - What are three methods for estimating stand-alone...Ch. 6 - When is revenue recognized with respect to...Ch. 6 - In a franchise arrangement, what are a franchisors...Ch. 6 - When does a company typically recognize revenue...Ch. 6 - Prob. 6.20QCh. 6 - Prob. 6.21QCh. 6 - Prob. 6.22QCh. 6 - Must bad debt expense be reported on its own line...Ch. 6 - Explain the difference between contract assets,...Ch. 6 - Explain how to account for revenue on a long-term...Ch. 6 - Prob. 6.26QCh. 6 - Prob. 6.27QCh. 6 - Timing of revenue recognition LO53 Estate...Ch. 6 - Allocating the transaction price LO54 Sarjit...Ch. 6 - Existence of a contract LO5-5 Tulane Tires wrote...Ch. 6 - Prob. 6.6BECh. 6 - Prob. 6.7BECh. 6 - Performance obligations; warranties LO55 Vroom...Ch. 6 - Prob. 6.9BECh. 6 - Prob. 6.10BECh. 6 - Variable consideration LO56 Leo Consulting enters...Ch. 6 - Prob. 6.16BECh. 6 - Prob. 6.17BECh. 6 - Prob. 6.18BECh. 6 - Prob. 6.19BECh. 6 - Prob. 6.20BECh. 6 - Prob. 6.21BECh. 6 - Estimating stand-alone selling prices: expected...Ch. 6 - Estimating stand-alone selling prices; residual...Ch. 6 - Prob. 6.24BECh. 6 - Prob. 6.25BECh. 6 - Contract assets and contract liabilities LO58...Ch. 6 - Long-term contract; revenue recognition over time;...Ch. 6 - Prob. 6.34BECh. 6 - Long-term contract; revenue recognition upon...Ch. 6 - Long-term contract; revenue recognition; loss on...Ch. 6 - Prob. 6.1ECh. 6 - Allocating transaction price LO54 Video Planet...Ch. 6 - Prob. 6.4ECh. 6 - Prob. 6.6ECh. 6 - Prob. 6.7ECh. 6 - Prob. 6.9ECh. 6 - Variable considerationmost likely amount; change...Ch. 6 - Variable considerationexpected value; change in...Ch. 6 - Prob. 6.12ECh. 6 - Prob. 6.13ECh. 6 - Prob. 6.14ECh. 6 - Approaches for estimating stand-alone selling...Ch. 6 - FASB codification research LO56, LO57 Access the...Ch. 6 - FASB codification research LO58 Access the FASB...Ch. 6 - Long-term contract; revenue recognition over time;...Ch. 6 - Prob. 6.1PCh. 6 - Prob. 6.2PCh. 6 - Prob. 6.3PCh. 6 - Prob. 6.5PCh. 6 - Variable consideration; change of estimate LO53,...Ch. 6 - Prob. 6.7PCh. 6 - Prob. 6.8PCh. 6 - Prob. 6.10PCh. 6 - Long-term contract; revenue recognition over time...Ch. 6 - Prob. 6.1DMPCh. 6 - Judgment Case 52 Satisfaction of performance...Ch. 6 - Judgment Case 53 Satisfaction of performance...Ch. 6 - Prob. 6.5DMPCh. 6 - Prob. 6.7DMPCh. 6 - Prob. 6.9DMPCh. 6 - Prob. 6.10DMPCh. 6 - Prob. 6.12DMPCh. 6 - Prob. 6.13DMPCh. 6 - Prob. 6.14DMPCh. 6 - Prob. 6.15DMPCh. 6 - Prob. 1CCTC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Question 2: Muscat Company has the following information. OMR Fixed Cost 8750 Break even Sales 16000 PV Ratio Profit when sales are 20000 New BE point if selling price is reduced by %25arrow_forwardTutorial Q. 5 Assuming that the cost structure and selling prices remain the same in Periods I and II, as given below: Period Sales (RM) Profit (RM) 1 240,000 18,000 2 280,000 26,000 a. Now find out what is the profit when sales are RM200,000, additionally calculate the sales required to earn a profit of RM40,000. b. Margin of safety at a profit of RM30,000 c. Variable cost in Period II.arrow_forward0 O Value Analysis 1016 Price Analysis O Spend Analysis Question 3 Which statement is FALSE: O Price analysis is used for strategic buy O Life cycle cost of ownership is used with critical buy 4 O Spend analysis is based on three main categories of spending costs O Price analysis uses an external benchmark to compare prices Question 4 Cost breakdown problem: A supplier indicates a 20% increase in labor costs and demands a 20% increase in purchasing What is the current purchasing.price? bould be the new purchasing price?arrow_forward
- E20.25 LO 20.3 Cost-plus pricing formulas; missing data: manufacturer The following data relate to LawnMate Corporation's top-of-the-line lawnmower. Variable manufacturing cost Applied fixed manufacturing cost Variable selling and administrative cost Allocated fixed selling and administrative cost $500 150 120 ? To achieve a target price of $950 per lawnmower, the markup percentage is 12.5 per cent on total unit cost. Required 1. What is the fixed selling and administrative cost allocated to each unit of LawnMate's top-of-the-line mower? 2. For each of the following cost bases, develop a cost-plus pricing formula that will result in a target price of $950 per mower: (a) variable manufacturing cost (b) absorption manufacturing cost (c) total variable cost.arrow_forwardplease avoid solution image based thnxarrow_forwardQuestion 3.2.1 Use the attached information to calculate the following The selling price per unit that will realize an operating profit of R720000 3.2. 2 The number of units that must be sold in order to earn an operating profit of R720000, if the selling price increases by 10% and fixed costs increase by R87000arrow_forward
- Ch. 6 Break-Even Please solve and explain the following problem "Larson's sells it's products for $12 per unit. The contribution margin per unit is $8.00 and fixed costs are $75,000. How many units does Larson's have to sell to break-even?"arrow_forwardQuestion 2: Minimum selling price and optimum price from price-demand relationships. – BIL Motor Components Ltd The directors of XYZ Plc. have been analyzing the performance of one of its subsidiary companies BIL Motor Components Ltd. In an attempt to win over key customers in the motor industry and to increase its market share, BIL has decided to charge a price lower than its normal price for component TD463 when selling to the key customers who are being targeted. Details of component TD463's standard costs are as follows: Component TD463 Batch size 200 units Machine Machine Machine Assembly (£) Group 1 (£) Group 7 (£) Group 29 (£) Materials (per Unit) Labour (per Unit) Variable Overheads 0.65 (per Unit) Fixed Overheads 26.00 17.00 3.00 2.00 1.60 0.75 1.20 0.72 0.80 0.36 3.00 2.50 1.50 0.84 (per Unit) Total 31.65 21.82 3.05 5.40 Setting-up costs per batch of 200 Units £10.00 £6.00 £4.00 £0.00 Required: (a) Compute the lowest selling price at which one batch of 200 units could be…arrow_forward#24arrow_forward
- Question 19 SC Johnson distributes their OFF! Clip on product through various retail distribution channels (retailers). Based on current pricing strategy, they recommend each retailer sell each OFF! Clip on for $7.99. Each retailer purchases the OFF! Clip on from SC Johnson for $3.75 (wholesale price) and SC Johnson's variable costs are $2.07. One of the retailer's has decided to make a large volume purchase of the OFF! Clip on product so they can run a significant in-store price promotion to stimulate greater customer demand. This retailer wants to calculate what the increase in demand will need to be if they receive a special wholesale price per unit from SC Johnson at $3.50 per unit and the retailer applies a 25% promotional discount to their retail price. Based on this information, using the volume hurdle formula, calculate what volume hurdle % the retailer must achieve to break-even with this promotion. 80.10% 70.10% 50.90% 89.10%arrow_forwardcompany 1 sells a product for $24.30 with trade discount rates of 7% and 3%. company 2 sells the same product for $22.30 with two trade discount rates of 7% and 5%. a. Which company is offering it for a cheaper price? The company 1 The company 2 b. What further trade discount rate must the company with the higher price provide to match the lower price?arrow_forwardPlease do not give solution in image format thankuarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Pricing Decisions; Author: Rutgers Accounting Web;https://www.youtube.com/watch?v=rQHbIVEAOvM;License: Standard Youtube License