The Following Information Relates to Questions
Bensen Corporation Manufactures $\bullet$

question 73

Multiple Choice

The following information relates to questions
Bensen Corporation manufactures equipment used in the construction industry.Bensen manufactures a wide variety of machinery, including very small individual pieces of machinery to very large, complex systems containing numerous components.Unit selling prices range from $50,000 to $5,000,000 and are quoted inclusive of installation and training.The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications.
Bensen Corporation has the following agreement with Keller Inc.:
$\bullet$ purchases equipment from Bensen for a price of $2,000,000 and chooses Bensen to do the installation.Bensen charges the same price for the equipment irrespective of whether it does the installation or not.
$\bullet$ The price of the installation service is estimated to have a fair value of $100,000.The fair value of the training sessions is estimated at $200,000.
$\bullet$ Keller is obligated to pay Bensen the $2,000,000 upon the delivery and installation of the equipment.
$\bullet$ Bensen delivers the equipment on September 1, 2011, and completes the installation of the equipment on November 1, 2011.Training related to the equipment starts once the installation is completed and lasts for 1 year.The equipment has a useful life of 10 years.
-How much, if any of the sales price of $2,200,000 is allocated to the installation component?

• A)$0
• B)$100,000
• C)$88,000
• D)$176,000

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Definitions:

Opponent Processes

A theory initially applied to color vision, suggesting that the perception of color is controlled by the activity of two opposing processes.

Additive Colour Mixing

The process of mixing different colors of light, where combining various lights can create a broad spectrum of colors.

Opponent Process Theory

A psychological and neurological model that describes how opposing neural systems determine the perception of colors, emotions, and motivations.

Trichromatic Theory

A theory in vision science stating that the human eye perceives color through the relative rates of response by three types of cone cells, each sensitive to different wavelengths of light.