Question
John Storage sells silo storage containers to farmers. The stand alone selling price of the silo is $130,000 and does not include any warranty. A
John Storage sells silo storage containers to farmers. The stand alone selling price of the silo is $130,000 and does not include any warranty. A farmer may choose to purchase a 2-year warranty for a normal selling price of $5,000. For the current month, John Storage is offering a promotion which involves selling a "package" which includes a silo plus free 2-year warranty for $170,000. John Storage cost for one silo is $90,000. Using the relative fair value method, how much gross profit should be recognized by John at the date of sale of one "package"?
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