Bria Furniture Sells Bed Frames and Mattresses

question 262

Essay

Bria Furniture sells bed frames and mattresses.One of its products is a premium therapeutic bed set produced by OmniSleep,which comes with a mattress and a bed frame.Bria offers a package consisting of the mattress,the frame,and on-site installation by its staff.All of these components can be sold separately,as often done by other vendors,so Bria concludes that these are separate performance obligations.Bria sells the OmniSleep package for $3,000.The mattress and the frame are sold separately for $2,000 and $900,respectively.Other vendors in the same area typically charge $200 for on-site installation.Bria does not sell on-site installation separately.On average,the prices charged by Bria are 10% higher than those of its competitors.Bria estimates that it incurs about $100 of compensation and other costs to provide the installation service.The profit margin over cost is estimated to be approximately 35%.
Required: Estimate the stand-alone selling price of the installation service using (a)the adjusted market assessment approach, (b)the expected cost plus margin approach,and (3)the residual approach.

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Definitions:

Expected Dividend

The forecasted payment of dividends to shareholders based on the company's past dividends and future earnings projections.

Per Share

A term used to describe a financial ratio or statistic as it relates to one individual share of stock.

Annual Dividends

The total amount of dividend payments a company pays out to its shareholders in one year.

Desired Rate of Return

The minimum return an investor expects to achieve by investing in a particular asset, taking into account the asset's risk level.