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The Cullumber Store is an experienced home appliance dealer. Cullumber Store also offers a variety of services together with the home appliances that it sels.
The Cullumber Store is an experienced home appliance dealer. Cullumber Store also offers a variety of services together with the home appliances that it sels. Assume that Cullumber Store sells dishwashers on a standalone basis. Cullumber Store also sells installation services and maintenance services for dishwashers. However, Cullumber Store does not offer installation or maintenance services to customers who buy dishwashers from other vendors. Pricing for dishwashers is as follows: In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $300. Additionally, the incremental amount charged by Cullumber 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 Cullumber Store does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $1,500. (b) Assume that a customer purchases a dishwasher with both installation and maintenance services for $1,850. Based on its experience, Cullumber Store 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. Indicate the amount of revenue that should be allocated to the dishwasher the installation, and to the maintenance contract
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