Kramer Iron Works signs a contract to provide three different products to a customer for a total transaction price of $325,000. Each product represents a separate performance obligation. Kramer only only sells two of the three products on an individual basis so they must estimate the standalone selling price for the third product. The information about these three products is provided in the
following table.
Product
Standalone Selling Price
Market Competition Price
Forecasted Cost
A-1
$87,500
$66,500
$60,000
A-2
150,000
156,000
125,000
A-3
Not Available
100,000
65,000
Total
$322,500
$250,000
Refer to Kramer Iron Works. Allocate the transaction price using the adjusted market assessment approach.
What will be an ideal response?
Answer:
Product
Market Competitor Price
Percentage of Total
Allocated Transaction Price
A-1
$66,500
20.62%
$67,015
A-2
156,000
48.37%
157,203
A-3
100,000
31.01%
100,782
Total
$322,500
100.00%
$325,000
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