[Solved] Mahogany Billiards Sells Upscale Pool Tables and Related Supplies

Question 283
Essay

Mahogany Billiards sells upscale pool tables and related supplies.It sells a premium package consisting of a pool table imported from Europe,a full set of cues and balls,and on-site installation by its staff.Mahogany determines that each of these components is a performance obligation.Mahogany sells the pool table separately for $3,000 and the set of cues and balls for $1,000.The entire package is sold at $4,500.Mahogany does not offer on-site installation separately,as part of company policy.It also estimates that it incurs about $350 of compensation and other costs per each installation.Other competing vendors sell on-site installation separately for $450,on average.Mahogany typically earns a profit margin of 40% over cost,and its prices are generally 5% lower than those charged by competitors.
Required: Estimate the stand-alone selling price of the installation service using (a)the adjusted market assessment approach, (b)the expected cost plus margin approach,and (3)the residual approach.

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