Question

Company A offers a discount on an extended warranty on its cell phone when the warranty is purchased at the time the cell phone is purchased. The warranty normally has a price of $150, but Company A offers it for $120 when purchased along with a cell phone. Company A anticipates a 75% chance that a customer will purchase the extended warranty along with the cell phone . Assume Company A sells 1,000 cell phone with the extended warranty discount offer. What is the total stand-alone selling price that Company A would use for the extended warranty discount option for purposes of allocating revenue among the performance obligations in those 1,000 cell phone contracts

Answer 1

Answer:
`= 22500`

Step-by-step explanation:

given data:

original price = $150.

offer price = $120.

chance the customer would purchase the extended warranty = 75%.

no of unit sold = 1000.

solution:

total stand alone price to be used by the company.

`= original price - offer price * unit sold * extended warranty.`

`= $150 - $120* 1000*0.75`

`= 30*1000*0.75`

`= 22500`