Pléiade sells an industrial oven and a maintenance service tailored to this customer, for 71,500. The oven is regularly sold on its own at 60,000. The maintenance service is never sold separately; management uses the expected cost plus a margin approach, with an expected cost of 15,000 and a margin of 20% on cost, which (case data) is Pléiade's usual margin on comparable services. Compute the estimated stand-alone selling price of the service, then the transaction price allocated to it.
- Contract price
- 71,500
- Observable stand-alone selling price of the oven
- 60,000
- Expected cost of the maintenance service
- 15,000
- Margin on cost used
- 20 %