Question
BARTCO is required to stand ready to produce a part for a customer under a standby supply agreement. The customer is not obligated to purchase
BARTCO is required to stand ready to produce a part for a customer under a standby supply agreement. The customer is not obligated to purchase any parts (i.e., there is no minimum guaranteed volume); however, it is highly likely the customer will purchase parts because the part is required to manufacture the customers product, and it is not practical for the customer to buy parts from multiple suppliers because of product specificity issues. In addition, the customers current product design is relatively new. Question: What is the performance obligation here? Is it (a) the standby supply agreement, (2) the issuance of a purchase order, (3) the production of the part or (4) delivery of the part? Why and why not?
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