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Crane Company manufactures products ranging from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $ 2 0 0 ,
Crane Company manufactures products ranging from simple automated machinery to complex systems containing numerous
components. Unit selling prices range from $ to $ and are quoted inclusive of installation. The installation process
does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order
for the installed equipment to perform to specifications. Crane has the following arrangement with Waterway Inc.
Waterway purchases equipment from Crane for a price of $ and contracts with Crane to install the equipment.
Crane charges the same price for the equipment irrespective of whether it does the installation or not. The cost of the
equipment is $
Waterway is obligated to pay Crane the $ upon the delivery of the equipment.
Crane delivers the equipment on June and completes the installation of the equipment on September The
equipment has a useful life of years. Assume that the equipment and the installation are two distinct performance obligations
which should be accounted for separately.
Assuming Crane does not have market data with which to determine the standalone selling price of the installation services. As a
result, an expected cost plus margin approach is used. The cost of installation is $; Crane prices these services with a
margin relative to cost
a
How should the transaction price of $ be allocated among the performance obligations? Do not round intermediate
calculations. Round final answers to decimal places, eg
Equipment $
Installation $
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