Question

Compo Center sells a full assortment of computer parts, including motherboards, video cards, and cables, and also offers complementary computer assembly services. The entire package sells for $3,000.

The assembly service is offered by other vendors for $100 on average, and Compo typically charges approximately 20% more than other vendors for similar services on a stand-alone basis.

Required: Estimate the stand-alone selling price of the assembly service using the adjusted market assessment approach.

Compo estimates that it incurs $50 in labor and materials on average to complete one assembly order, with an average of 75% profit based on cost.

Required: Assuming that computer parts and assembly service are separate performance obligations, estimate the stand-alone selling price of the assembly service based on the expected cost plus margin approach.

Typically, if Compo were to sell only the parts in an advanced workstation, with no assembly, the price would be $2,800.

Required: Assuming that computer parts and assembly service are separate performance obligations, estimate the stand-alone selling price of the assembly service based on the residual approach.

Answer 1

adjusted market assessment approach estimated the standalone price by taking into account the entitys competitors price and adjusting it with its own cost and margins

expected cost plus margin is fairly simple and suggested by the name itself,where the margin is added to the estimated cost and arrived at the standalone price.

residual approach estimates the standalone price by subtracting the observable standalone price of other services promised from the transaction price.

assembly service is offered by other vendors	100
add:20%	20
stand-alone selling price of the assembly service using the adjusted market assessment approach.	120$
labor and material cost	50
add:profit@75%	37.5
selling price of the assembly service based on the expected cost plus margin approach.	87.5$
labor and material cost	50$
estimate the stand-alone selling price of the assembly service based on the residual approach.	50$

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