Bria Furniture sells bed frames and mattresses. One of its products is a premium therapeutic bed set produced by OmniSleep, which comes with a mattress and a bed frame. Bria offers a package consisting of the mattress, the frame, and on-site installation by its staff. All of these components can be sold separately, as often done by other vendors, so Bria concludes that these are separate performance obligations. Bria sells the OmniSleep package for $3,000. The mattress and the frame are sold separately for $2,000 and $900, respectively. Other vendors in the same area typically charge $200 for on-site installation. Bria does not sell on-site installation separately. On average, the prices charged by Bria are 10% higher than those of its competitors. Bria estimates that it incurs about $100 of compensation and other costs to provide the installation service. The profit margin over cost is estimated to be approximately 35%. Required: (a) Estimate the stand-alone selling price of the installation service using the adjusted market assessment approach. (b) Estimate the stand-alone selling price of the installation service using the expected cost plus margin approach. (c) Estimate the stand-alone selling price of the installation service using the residual approach. (a) Stand-alone selling price (b) Stand-alone selling price (c) Stand-alone selling price
Bria Furniture sells bed frames and mattresses. One of its products is a premium therapeutic bed set produced by OmniSleep, which comes with a mattress and a bed frame. Bria offers a package consisting of the mattress, the frame, and on-site installation by its staff. All of these components can be sold separately, as often done by other vendors, so Bria concludes that these are separate performance obligations. Bria sells the OmniSleep package for $3,000. The mattress and the frame are sold separately for $2,000 and $900, respectively. Other vendors in the same area typically charge $200 for on-site installation. Bria does not sell on-site installation separately. On average, the prices charged by Bria are 10% higher than those of its competitors. Bria estimates that it incurs about $100 of compensation and other costs to provide the installation service. The profit margin over cost is estimated to be approximately 35%. Required: (a) Estimate the stand-alone selling price of the installation service using the adjusted market assessment approach. (b) Estimate the stand-alone selling price of the installation service using the expected cost plus margin approach. (c) Estimate the stand-alone selling price of the installation service using the residual approach. (a) Stand-alone selling price (b) Stand-alone selling price (c) Stand-alone selling price
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Bria Furniture sells bed frames and mattresses. One of its products is a premium therapeutic bed set
produced by OmniSleep, which comes with a mattress and a bed frame. Bria offers a package
consisting of the mattress, the frame, and on-site installation by its staff. All of these components can
be sold separately, as often done by other vendors, so Bria concludes that these are separate
performance obligations. Bria sells the OmniSleep package for $3,000. The mattress and the frame
are sold separately for $2,000 and $900, respectively. Other vendors in the same area typically
charge $200 for on-site installation. Bria does not sell on-site installation separately. On average, the
prices charged by Bria are 10% higher than those of its competitors. Bria estimates that it incurs about
$100 of compensation and other costs to provide the installation service. The profit margin over cost
is estimated to be approximately 35%.
Required:
(a) Estimate the stand-alone selling price of the installation service using the adjusted market
assessment approach.
(b) Estimate the stand-alone selling price of the installation service using the expected cost plus
margin approach.
(c) Estimate the stand-alone selling price of the installation service using the residual approach.
(a) Stand-alone selling price
(b) Stand-alone selling price
(c) Stand-alone selling price
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