Estimating standalone selling prices: expected cost plus margin approach
Response to the following problem:
O'Hara Associates sells golf clubs and with each sale of a full set of clubs provides complementary club-fitting services. A full set of clubs with the fitting services sells for $1,500. O'Hara estimates that it incurs $60 of staff compensation and other costs to provide the fitting services, and normally earns 30% over cost on similar services.
Assuming that the golf clubs and the club fitting services are separate performance obligations, estimate the stand-alone selling price of the club-fitting services using the expected cost plus margin approach.