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A product and service are bundled together and sold to customers for $450.The fair values of the product and service are $350 and $150 respectively.
-Under the relative fair value method, how much would be allocated to the product?
A)$150.00
B)$388.89
C)$350.00
D)$300.00

Question

Quizplus · Accepted Answer

Under relative fair value method, the amounts are allocated based on the proportion of the fair value of each element to the total fair value of the bundle. Therefore, the allocation to the product would be (350/500) x 450 = $388.89.

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