Richardson Systems sells integrated bottling manufacturing systems that involve a conveyer, a labeler, a filler, anda capper. All of this equipment is sold separately by other vendors, and the fair values of the separate equipmentare as follows:Conveyer $20,000Labeler 10,000Filler 15,000Capper 5,000Total $50,000Richardson sells the integrated system for $45,000. Each of the components is shipped separately to the customerfor the customer to install.Required:1. Assume that each of the components can be used independently, even though Richardson sells them as anintegrated system. How much revenue should be allocated to each component?2. Now assume that the labeler, filler, and capper can’t be used in production without the conveyer, and that the conveyer is the last component installed. How much revenue should be recognized at the time the conveyer is installed?
Richardson Systems sells integrated bottling manufacturing systems that involve a conveyer, a labeler, a filler, and
a capper. All of this equipment is sold separately by other vendors, and the fair values of the separate equipment
are as follows:
Conveyer $20,000
Labeler 10,000
Filler 15,000
Capper 5,000
Total $50,000
Richardson sells the integrated system for $45,000. Each of the components is shipped separately to the customer
for the customer to install.
Required:
1. Assume that each of the components can be used independently, even though Richardson sells them as an
integrated system. How much revenue should be allocated to each component?
2. Now assume that the labeler, filler, and capper can’t be used in production without the conveyer, and that the conveyer is the last component installed. How much revenue should be recognized at the time the conveyer is installed?
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