Mahogany Billiards Sells Upscale Pool Tables and Related Supplies

question 41

Essay

Mahogany Billiards sells upscale pool tables and related supplies. It sells a premium package consisting of a pool table imported from Europe, a full set of cues and balls, and on-site installation by its staff. Mahogany determines that each of these components is a performance obligation. Mahogany sells the pool table separately for $3,000 and the set of cues and balls for $1,000. The entire package is sold at $4,500. Mahogany does not offer on-site installation separately, as part of company policy. It also estimates that it incurs about $350 of compensation and other costs per each installation. Other competing vendors sell on-site installation separately for $450, on average. Mahogany typically earns a profit margin of 40% over cost, and its prices are generally 5% lower than those charged by competitors.
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 (c) the residual approach.

---

Definitions:

Sodium Cyanide

A chemical compound that is highly toxic and widely used in industrial processes, especially in gold mining.

Negatives

In photography, a reversed image with inverted colors and values; in general usage, aspects or conditions that are not favorable or desired.

Connectionist Models

A computational approach in cognitive science that models mental or behavioral phenomena as the emergent processes of interconnected networks of simple units.

Word-Superiority Effect

A phenomenon in psychology where people recognize letters more accurately when they are within a word compared to when they stand alone or are in a non-word.