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:

Input-Related

Pertaining to or involving the resources, data, or materials that are used to produce an output or result.

Dollar Sales Volume

The total revenue achieved from the sales of products or services, measured in dollars.

Customer Contacts

Interactions or communications between a business and its customers through various channels like phone, email, or in-person visits.

Input-Related

Pertains to factors, resources, or materials that are required for the production process or service delivery.