Answer:
To calculate how much of the transaction price should be allocated to each performance obligation in the contract, you need to use the relative standalone selling price method. This method requires you to estimate the standalone selling price of each performance obligation and then allocate the transaction price proportionally based on those estimates.
The transaction price is the amount of consideration that the Rink expects to receive from the customer in exchange for the goods and services. In this case, the transaction price is $300, which is the annual membership fee.
The performance obligations are the promise to transfer distinct goods or services to the customer. In this case, there are two performance obligations: the unlimited use of ice-skating facilities and locker rooms, and the ten coupons for discounted meals.
The standalone selling price is the price at which the Rink would sell a good or service separately to a customer. The Rink can use various methods to estimate the standalone selling price, such as the adjusted market assessment approach, the expected cost plus a margin approach, or the residual approach.
For the unlimited use of ice-skating facilities and locker rooms, the Rink can use the adjusted market assessment approach, which involves evaluating the market and the prices of competitors for similar goods or services. For example, if the Rink observes that other ice-skating facilities charge $25 per hour for the use of their facilities and locker rooms, and the Rink estimates that the average customer uses the facilities for 12 hours per year, then the Rink can estimate the standalone selling price of this performance obligation as:
$25 x 12 = $300
For the ten coupons for discounted meals, the Rink can use the expected cost plus a margin approach, which involves forecasting the expected costs of satisfying the performance obligation and then adding an appropriate margin. For example, if the Rink estimates that the cost of a $5 meal is $3, and the Rink expects to earn a 20% margin on the meals, then the Rink can estimate the standalone selling price of one coupon as:
($3 x 1.2) x (1 - 0.25) = $2.70
This is the price that the Rink would charge for a coupon that entitles the customer to a 25% discount on a $5 meal. However, the rink also needs to consider the fact that not all coupons will be redeemed and that the meals would still be discounted by 5% even without the coupons. Therefore, the Rink can adjust the standalone selling price of one coupon by multiplying it by the expected redemption rate and the incremental discount rate. For example, if the Rink estimates that 80% of the coupons will be redeemed and that the coupons offer an additional 20% discount (25% - 5%) on the meals, then the Rink can estimate the standalone selling price of one coupon as:
$2.70 x 0.8 x 0.2 = $0.432
This is the price that the Rink would charge for a coupon that reflects the expected redemption rate and the incremental discount rate. To find the standalone selling price of the ten coupons, the Rink can multiply this price by 10. For example:
$0.432 x 10 = $4.32
This is the price that the Rink would charge for the ten coupons as a bundle.
To allocate the transaction price to the performance obligations, the rink can use the following formula:
Allocation = (Standalone selling price of a performance obligation / Total standalone selling price of all performance obligations) x Transaction price
Using this formula, the rink can allocate the transaction price as follows:
Allocation to the unlimited use of ice-skating facilities and locker rooms = ($300 / ($300 + $4.32)) x $300 = $298.59
Allocation to the ten coupons for discounted meals = ($4.32 / ($300 + $4.32)) x $300 = $1.41
Therefore, the Rink should allocate $298.59 of the transaction price to the unlimited use of ice-skating facilities and locker rooms, and $1.41 of the transaction price to the ten coupons for discounted meals.