QUESTION 5

1. The Appliance Store is an experienced home appliance dealer. Appliance Store also offers a number of services together with the home appliances that it sells. Assume that Appliance Store sells dishwashers on a standalone basis. Appliance Store also sells installation services and maintenance services for dishwashers. However, Appliance Store does not offer installation or maintenance services to customers who buy dishwashers from other vendors. Pricing for dishwashers is as follows:
2. Dishwasher only
3. $1,140
4. Dishwasher with Installation service
5. 1,260
6. Dishwasher with maintenance services
7. 1,380
8. Dishwasher with installation and maintenance services
9. 1,450
11. In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $240. Additionally, the incremental amount charged by Appliance Store for installation approximates the amount charged by independent third parties. Dishwashers are sold subject to a general right of return. If a customer purchases a dishwasher with installation and/or maintenance services, in the event Appliance Store does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $1,140.
13. (a)Indicate the amount of revenue that should be allocated to the dishwasher the installation, and to the maintenance contract.