Solved

Seller Enters into a Contract with a Customer to Sell

question 5

Multiple Choice

Seller enters into a contract with a customer to sell Products A, B and C for a total transaction price of £100,000. Seller regularly sells Product A for £25,000 and Product B for £45,000 on a stand-alone basis. Product C is a new product that has not been sold previously, has no established price, and is not sold by competitors in the market. Products A and B are not regularly sold together at a discounted price. Product C is delivered on 1 March, and Products A and B are delivered on 1 April. How should Seller determine the stand-alone selling price of Product C?
I. Seller can use the residual approach to estimate the stand-alone selling price of Product C, because Seller has not previously sold or established a price for Product C.
II. Prior to using the residual approach, Seller should assess whether any other observable data exists to estimate the stand-alone selling price. For example, although Product C is a new product, Seller might be able to estimate a stand-alone selling price through other methods, such as using expected cost plus a margin.
III. Seller has observable evidence that Products A and B sell for £25,000 and £45,000 respectively, for a total of £70,000. The residual approach results in an estimated stand-alone selling price of £30,000 for Product C (£100,000 total transaction price less £70,000) .

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Definitions:

Swedish Company

A business entity that is registered and operates within Sweden, adhering to the country's regulatory and business environment.

Prestigious Appliances

High-end home appliances that are revered for their quality, performance, and brand reputation.

DSM-5

The fifth edition of the Diagnostic and Statistical Manual of Mental Disorders, a classification and diagnostic tool used by mental health professionals.

Trait Domains

Broad categories used to describe and organize individual differences in personality, such as extraversion, openness, and conscientiousness.