Crane Center is an experienced home appliance dealer. Crane Center also offers a number of services for the home appliances that it sells. Assume that Crane Center sells ovens on a standalone basis. Crane Center also sells installation services and maintenance services for ovens. However, Crane Center does not offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for ovens is as follows. Oven only $780 Oven with installation service 850 Oven with maintenance services 1,000 Oven with installation and maintenance services 963 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $220. Additionally, the incremental amount charged by Crane 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 Crane Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $780. Assume that a customer purchases an oven with both installation and maintenance services for $963. Based on its experience, Crane 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.)
Crane Center is an experienced home appliance dealer. Crane Center also offers a number of services for the home appliances that it sells. Assume that Crane Center sells ovens on a standalone basis. Crane Center also sells installation services and maintenance services for ovens. However, Crane Center does not offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for ovens is as follows. Oven only $780 Oven with installation service 850 Oven with maintenance services 1,000 Oven with installation and maintenance services 963 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $220. Additionally, the incremental amount charged by Crane 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 Crane Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $780. Assume that a customer purchases an oven with both installation and maintenance services for $963. Based on its experience, Crane 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.)
Chapter3: Setting Up A New Company
Section: Chapter Questions
Problem 4.5C
Related questions
Question
am. 113.
Transcribed Image Text:Crane Center is an experienced home appliance dealer. Crane Center also offers a number of services for the home appliances that it
sells. Assume that Crane Center sells ovens on a standalone basis. Crane Center also sells installation services and maintenance
services for ovens. However, Crane Center does not offer installation or maintenance services to customers who buy ovens from other
vendors. Pricing for ovens is as follows.
Oven only
Oven with installation service
$780
850
1,000
Oven with installation and maintenance services
963
Oven with maintenance services
In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at
$220. Additionally, the incremental amount charged by Crane 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 Crane Center does not complete the service satisfactorily, the customer is only entitled to a refund
of the portion of the fee that exceeds $780.
Assume that a customer purchases an oven with both installation and maintenance services for $963. Based on its experience, Crane
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 0 decimal places, e.g. 5,275.)
Oven
Installation
tA
$
Maintenance
$
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
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.Recommended textbooks for you