Beaumont Company enters into a contract to provide a highquality diving-certification preparation package, includinggoggles, snorkels, air tanks, fins, a wetsuit, and 5 privatelessons to get ready for diving certifications. The entire packagesells for $2,500.
Other competing sellers in the same region charge an average of$250 for a set of goggles and $750 for the lessons, if soldseparately. Beaumont Company usually sells at a 5% discountcompared to other shops, since it is a bit farther away from theocean.
1. Required: What would be Beaumont’sstand-alone selling price of the goggles and the lessons, based onadjusted market assessment approach? Show computations.
2. Typically, Beaumont incurs $375 on compensation and othercosts to provide the private lessons, and earns an average of 40%profit over cost on service offerings. Required:Assuming that the diving equipment and the certification lessonsare separate performance obligations, estimate the stand-aloneselling price of the certified lessons based on the expected costplus margin approach. Show computations
3. Typically, if Beaumont were to sell the equipment only, itwould ask for $2,000. Required: Assuming that thediving equipment and the certification lessons are separateperformance obligations, estimate the stand-alone selling price ofthe lessons based on the residual approach. Show computations.
