California State University Los AngelesACCT 595 Video Planet (“VP”) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and onsite installation by VP staff

Subject:MarketingPrice:4.87 Bought7

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California State University Los AngelesACCT 595

Video Planet (“VP”) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and onsite 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 $1,750 and sells the remote separately for $100, and offers the entire package for $1,900. VP does not sell the installation service separately. VP is aware that other similar vendors charge $150 for the installation service. VP also estimates that it incurs approximately $100 of compensation and other costs for VP staff to provide the installation service. VP typically charges 40% above cost on similar sales.

Required:

1.            Estimate the stand-alone selling price of the installation service using the adjusted market assessment approach.

2.            Estimate the stand-alone selling price of the installation service using the expected cost plus margin approach.

3.            Estimate the stand-alone selling price of the installation service using the residual approach.