Question

Great American Oil Change (GAO) sells a combined oil change service and parts package for $30. A customer who supplies the parts (oil and filter) is charged $20 for only the service, whereas a customer who buys only the oil and filter (for do-it-yourself use) is charged $20 for the parts. The parts cost GAO $14. Determine the dollar amount of revenue from the oil change service versus the sale of parts for each combined oil change package TIP: To calculate the percentage of the combined package that relates to the service, divide the stand-alone selling price of the service by the combined stand-alone selling prices of both the service and parts. Allocated Transaction Price Parts Service

Answer 1

Answer:

Oil change Service $15

Sales of Parts $15

Explanation:

Calculation to Determine the dollar amount of revenue from the oil change service versus the sale of parts for each combined oil change packages

First step

Oil change service= $20

Selling price of parts = $20

Total $40

Second step

Percentage of each activity in total Revenue

Oil change service = $20

Oil change service=20/40*100

Oil change service=50%

Sale of parts= $20

Sale of parts=20/40*100

Sale of parts=50%

Third step is to calculate the Allocated Transaction Price for both parts and service

Combine oil change service and part package = $30

Oil change service= $30 * 20/40

Oil change service=$15

Sale of parts = $30 * 20/40

Sale of parts= $15

Therefore the dollar amount of revenue from the oil change service is $15 and the sale of parts is $15

Answer 2

Selling price allocated for supply and service is $15 each

Allocation based problem;

Given:

Service price = $20

Price of Oil and filter = $20

Combine service charges = $30

Computation:

In proportion to the standalone selling price, a combined selling price should indeed be apportioned between supply and services.

Selling price allocated for service = $30 × [20/40]

Selling price allocated for service = $30 × [0.5]

Selling price allocated for service = $15

Selling price allocated to supply = $30 × [20/40]

Selling price allocated to supply = $30 × [0.5]

Selling price allocated to supply = $15

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