Question

Video Planet (VP) sells a big screen TV package consisting of a 60-inch HDTV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer's home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $1,700, sells the remote separately for $100, and offers the installation service separately for $200. The entire package sells for $1,900.

Required: How much revenue would be allocated to the TV, the remote, and the installation service?

Answer 1

Video Planet (VP)

The revenue that would be allocated to the TV, the remote, and the installation service:

TV = $1,615

Remote = $95

Installation service = $190

Step-by-step explanation:

a) Data and Calculations:

Sales price of 60-inch TV = $1,700

Sales price of remote = $100

Installation service = $200

Total sales price, if sold separately = $2,000

Sales price of entire package = $1,900

Revenue allocated to the 3 performance obligations:

TV = $1,700/$2,000 * $1,900 = $1,615

Remote = $100/$2,000 * $1,900 = $95

Installation service = $200/$2,000 * $1,900 = $190

Total revenue allocated = $1,900