Appliance Center is an experienced home appliance dealer. Appliance Center also offers a number of services together with the home appliances that it sells. Assume that Appliance Center sells ovens on a standalone basis. Appliance Center also sells delivery services and maintenance services for ovens. However, Appliance center does not over offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for oven is as follows.
Ovens only $800
Ovens with delivery service 850
Ovens with maintenance services 975
Ovens with delivery and maintenance services 1,000
In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $175. Additionaly, the incremental amount charged by Appliance Center for installation approximates the amount charged by independent third parties. Ovens are sold subject to a general right of return. If a customer purchases Oven with Installation and/or maintenance services, in the event Appliance Center does not complete the service satisfactorily, the customer is only entitled to refund of the portion of the fee that exceeds $800.
Instruction:
A. Assume that a customer purchases an oven with both installation and maintenance services for $1,000. Based on its experience, Appliance Center believes that it is probable that the Installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately. Identify the separate performance obligations related to the Appliance Center revenue arrangement
B. Indicate the amount of revenues that should be allocated to the oven, the installation, and to the maintenance contract