Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 8, Problem 8.7E
Allocation of Variable Consideration. Green-Up Inc contracts with a building manager to provide goods and services to enhance energy efficiency It offers consulting services, including recommending ways to increase energy efficiency and monitor performance It also provides items such as thermostats and automatic light switches as part of the contract Green-Up charges 60% of the reduction in energy usage during the first year as a consulting fee Green-Up determines that the consulting services compose one performance obligation and the items provided are another performance obligation The estimated standalone selling prices are $180,000 for the consulting services and $100,000 for the items to increase energy efficiency The stated price in the contract for the items provided is a fixed payment of $100,000 The price stated for the consulting fees is 60% of the customer s reduction in future energy costs Green-Up estimates the variable consideration for the consulting services to be $180,000 What amount of the transaction price should Green-Up allocate to each performance obligation?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Requirements of the Offer. Technical ConsumerProducts, Inc. (TCP), makes and distributes energy-ecientlighting products. Emily Bahr was TCP’s district sales manager in Minnesota, North Dakota, and South Dakota whenthe company announced the details of a bonus plan. A districtsales manager who achieved 100 percent year-over-year salesgrowth and a 42 percent gross margin would earn 200 percentof his or her base salary as a bonus. TCP retained absolutediscretion to modify the plan. Bahr’s base salary was $42,500.Her final sales results for the year showed 113 percent yearover-year sales growth and a 42 percent gross margin. Sheanticipated a bonus of $85,945, but TCP could not a ord topay the bonuses as planned, and Bahr received only $34,229.In response to Bahr’s claim for breach of contract, TCP arguedthat the bonus plan was too indefinite to be an o er. Is TCPcorrect? Explain. [Bahr v. Technical Consumer Products, Inc.,601 Fed.Appx. 359 (6th Cir. 2015)] (See Agreement.)
Target costs, effect of process-design changes on service costs. Solar Energy Systems (SES) sells solar heating systems in residential areas of eastern Pennsylvania. A successful sale results in the homeowner purchasing a solar heating system and obtaining rebates, tax credits, and nancing for which SES completes all the paperwork. The company has identied three major activities that drive the cost of selling heating systems: identifying new contacts (varies with the number of new contacts); traveling to and between appointments (varies with the number of miles driven); and preparing and ling rebates and tax forms (varies with the number of solar systems sold). Actual costs for each of these activities in 2016 and 2017 are:
6. Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts:
a. What are the profitability indexes of the projects?
b. What should Fabulous Fabricators do?
**round to two decimal places**
Chapter 8 Solutions
Intermediate Accounting
Ch. 8 - What are the primary issues involved in revenue...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - Prob. 8.4QCh. 8 - Prob. 8.5QCh. 8 - How is a performance obligation defined?Ch. 8 - What are the two criteria to define a good or...Ch. 8 - Prob. 8.8QCh. 8 - What principles regarding timing and measurement...Ch. 8 - Prob. 8.10Q
Ch. 8 - What is variable consideration and what factors...Ch. 8 - Describe and contrast the two approaches used to...Ch. 8 - Prob. 8.13QCh. 8 - What factors should accountants consider to...Ch. 8 - Prob. 8.15QCh. 8 - How does a seller account for any consideration...Ch. 8 - Prob. 8.17QCh. 8 - What are the two exceptions to the general rule...Ch. 8 - What are the three criteria required to recognize...Ch. 8 - When an entity does not meet the three criteria...Ch. 8 - Prob. 8.21QCh. 8 - Prob. 8.22QCh. 8 - How does a firm estimate the degree completed...Ch. 8 - Can a firm record inventory out on consignment as...Ch. 8 - What method do agents in a transaction use to...Ch. 8 - Prob. 8.26QCh. 8 - What qualitative disclosures do the standards...Ch. 8 - All of the following are elements of a contract...Ch. 8 - Prob. 8.2MCCh. 8 - Telecom Co. enters into a two-year contract with a...Ch. 8 - The transaction price must reflect the time value...Ch. 8 - Prob. 8.5MCCh. 8 - When allocating the transaction price to separate...Ch. 8 - Which of the following indicators is not...Ch. 8 - During Yoar 1 Moriwothor Construction Company...Ch. 8 - All of the following are indicators that the...Ch. 8 - Prob. 8.10MCCh. 8 - Prob. 8.11MCCh. 8 - Identify a Contract with a Customer. Complete the...Ch. 8 - Prob. 8.2BECh. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Estimating Variable Consideration. Gear Garage...Ch. 8 - Estimating Variable Consideration. Using the...Ch. 8 - Estimating Variable Consideration. Sellet...Ch. 8 - Prob. 8.8BECh. 8 - Prob. 8.9BECh. 8 - Allocation of Transaction Price. Martin Software...Ch. 8 - Prob. 8.11BECh. 8 - Allocation of Transaction Price. Sycamore Sidewalk...Ch. 8 - Allocation of Transaction Price. Sycamore enters...Ch. 8 - Prob. 8.14BECh. 8 - Allocation of Transaction Price. Using the...Ch. 8 - When to Recognize Revenue. For each scenario...Ch. 8 - Prob. 8.17BECh. 8 - Prob. 8.18BECh. 8 - Prob. 8.19BECh. 8 - Prob. 8.20BECh. 8 - Sales with the Right of Return. Both incorporated...Ch. 8 - Sales with the Right of Return. Using the...Ch. 8 - Sales Returns. Historically, about 5% or the...Ch. 8 - Sales on Consignment. Hanna Lighting recertify...Ch. 8 - Determining Performance Obligations. Pagit Inc, a...Ch. 8 - Prob. 8.2ECh. 8 - Estimating Variable Consideration. King Rat Pest...Ch. 8 - Prob. 8.4ECh. 8 - Prob. 8.5ECh. 8 - Prob. 8.6ECh. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Prob. 8.9ECh. 8 - Prob. 8.10ECh. 8 - Determination of When to Recognize Revenue. Far...Ch. 8 - Prob. 8.12ECh. 8 - Prob. 8.13ECh. 8 - Prob. 8.14ECh. 8 - Prob. 8.15ECh. 8 - Prob. 8.16ECh. 8 - Prob. 8.17ECh. 8 - Prob. 8.18ECh. 8 - Prob. 8.19ECh. 8 - Other Principal Agent Transactions, Net Revenue...Ch. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Prob. 8.3PCh. 8 - Determining When to Recognize Revenue. Megrew...Ch. 8 - Prob. 8.5PCh. 8 - Prob. 8.6PCh. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.10PCh. 8 - Prob. 8.11PCh. 8 - Prob. 1JCCh. 8 - Prob. 1FSACCh. 8 - Prob. 1SSCCh. 8 - Basis for Conclusions Case 1: Control According to...
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
- Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? **round to two decimal places**arrow_forwardPlot the relationship between customer-service costs and number of service reports. Is the relationship economically plausible?arrow_forwardWhat challenges might managers at SES encounter in achieving the target cost and how might they overcome these challenges?arrow_forward
- Subject: AFAR #39arrow_forwardAlter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Picking order Delivering order Handling complaints Total delivery cost Cost Driver Number of items Number of orders Number of complaints Annual Cost $ 308,125 720,000 40,000 Annual Driver Volume 362,500 items 30,000 orders 160 complaints $ 1,068,125 The intern selected two customers, who were frequent customers, to use as an…arrow_forwardAlter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Picking order Delivering order Handling complaints Total delivery cost Cost Driver Number of items Number of orders Number of complaints Annual Cost $ 353,875 1,190,000 40,500 $ 1,584,375 Total order value (before delivery charge) Number of orders Total number of items Number of delivery complaints The intern selected two customers,…arrow_forward
- Alter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Cost Driver Annual Cost Annual Driver Volume Picking order Number of items $ 353,875 372,500 items Delivering order Number of orders 1,190,000 35,000 orders Handling complaints Number of complaints 40,500 150 complaints Total delivery cost $ 1,584,375 The intern selected two customers, who were frequent customers,…arrow_forwardAlter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Picking order Delivering order Handling complaints Total delivery cost Cost Driver Number of items Number of orders Number of complaints Annual Cost $ 286,000 522,500 32,400 $ 840,900 Total order value (before delivery charge) Number of orders The intern selected two customers, who were frequent customers, to use as an illustration of…arrow_forwardAlter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Cost Driver Annual Cost Annual Driver Volume Picking order Number of items $ 286,000 357,500 items Delivering order Number of orders 522,500 27,500 orders Handling complaints Number of complaints 32,400 135 complaints Total delivery cost $ 840,900 The intern selected two customers, who were frequent customers, to…arrow_forward
- Alter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Cost Driver Annual Cost Annual Driver Volume Picking order Number of items $ 330,750 367,500 items Delivering order Number of orders 942,500 32,500 orders Handling complaints Number of complaints 32,500 125 complaints Total delivery cost $ 1,305,750 The intern selected two customers, who were frequent customers,…arrow_forwardAlter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of the services AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage of the delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business intern spent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to charge customers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related to them: Activity Picking order Delivering order Handling complaints Total delivery cost Cost Driver Number of items Number of orders Number of complaints Total order value (before delivery charge) Number of orders Annual Cost $ 321,640 850,500 29,440 $ 1,201,580 The intern selected two customers, who were frequent customers, to use as an illustration…arrow_forwardNeed help with the following question,arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Fixed Asset Replacement Decision 1235; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=LJRzn9K8Nwk;License: Standard Youtube License