Question

A transaction price for multiple performance obligations should be allocated

Select one:

a. Based on competitors' prices

b. Based on the price forecast

c. Based on the transaction cost plus sales commission

d. Based on their relative fair values

Answer 1

The transaction price for multiple performance obligations should be allocated based on the standalone selling price of

each performance obligation.

Standalone selling price means the price at which the company sells goods or services to a customer.

Standalone selling price can be calculated by using the adjusted market price approach(fair value), expected cost plus margin approach, residual approach.

within the given options answer would be D) based on their relative fair values