Kramer Iron Works
Kramer Iron Works Signs a Contract to Provide

question 82

Essay

Kramer Iron Works
Kramer Iron Works signs a contract to provide three different products to a customer for a total transaction price of $325,000. Each product represents a separate performance obligation. Kramer only sells two of the three products on an individual basis so they must estimate the standalone selling price for the third product. The information about these three products is provided in the following table.
$\begin{array}{cccc}&&\text { Market }\\&\text { Standalone}&\text { Competition }&\text { Forecasted }\\\text { Product } & \text { Selling Price } & \text { Price } & \text { Cost } \\\text { A-1 } & \$ 87,500 & \$ 66,500 & \$ 60,000 \\\text { A-2 } & 150,000 & 156,000 & 125,000 \\\text { A-3 } & \text { Not Available } & \underline{100,000} & \underline{65,000} \\\text { Total } & & \$ 322,500 & \$ 250,00\end{array}$

-Refer to Kramer Iron Works. Allocate the transaction price using expected-cost-plus-a-margin approach.

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