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Woody Co. is an experienced pellet stove dealer that also offers a number of services for the stoves that it sells. Assume that Woody's sells
Woody Co. is an experienced pellet stove dealer that also offers a number | |||||
of services for the stoves that it sells. | |||||
Assume that Woody's sells pellet stoves on a standalone basis and that it also sells | |||||
installation and maintenance service for stoves. However, Woody's does not | |||||
offer installation or maintenance services to customers who buy stoves from other | |||||
vendors. Pricing of the pellet stoves is as follows: | |||||
Stove only | 1,200 | ||||
Stove with installation service | 1,275 | ||||
Stove with maintenance service | 1,465 | ||||
Stove with installation and maintenance services | 1,500 | ||||
In each instance in which maintenance services are provided, the maintenance | |||||
service is separately priced within the arrangement at $265. Additionally, the | |||||
incremental amount charged by Woody's for installation approximates the | |||||
amount charged by independent third parties. | |||||
a | The customer purchases a pellet stove with both installation and maintenance | ||||
services for $1,500. Based on its experience,Woody's believes that the | |||||
installation will be performed satisfatorily. Assume that the maintenance services | |||||
are priced separately, (the three components are distinct). | |||||
Identify the separate performance obligations related to this situation. | |||||
b | Indicate the amount of revenue that should be allocated to each performance | ||||
obligation. |
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