US CMA Part 1 · Chapter 1 · Question 8 of 23
A company sells a machine together with one year of maintenance for a bundled price of $1,200. The standalone selling prices are $1,000 for the machine and $500 for the maintenance. How much of the transaction price is allocated to the machine?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $800
Explanation
Under the revenue standard (ASC 606 / IFRS 15) the transaction price is allocated to performance obligations in proportion to relative standalone selling prices. Machine share = 1,000 / (1,000 + 500) = 2/3. Allocation = $1,200 x 2/3 = $800; maintenance receives $400.
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