Answer the following questions using the information below:
The Appliance Store sells a refrigerator and a freezer as a single package for $1,000. Other data are in the chart below.

-Using the stand-alone method with selling price as the weight for revenue allocation, what amount will be allocated to the refrigerator?
A)$500.00
B)$825.00
C)$687.50
D)$625.00

Question

Answer the following questions using the information below:
The Appliance Store sells a refrigerator and a freezer as a single package for $1,000. Other data are in the chart below.
 
-Using the stand-alone method with selling price as the weight for revenue allocation, what amount will be allocated to the refrigerator?
A)$500.00 
B)$825.00 
C)$687.50 
D)$625.00

Quizplus · Accepted Answer

Using the stand-alone method, we allocate revenue based on the selling price of each item. In this case, the selling price of the package is $1,000, which is split between the refrigerator and the freezer. According to the chart, the selling price of the refrigerator is $750 ($1,500 x 0.5). To allocate revenue to the refrigerator, we use the following formula:

Refrigerator revenue = Total package revenue x (selling price of refrigerator / total selling price of package) 
= $1,000 x ($750 / $1,500) 
= $500

Therefore, the amount allocated to the refrigerator is $500.

The best choice is C. It is the only answer that matches the calculated amount for the refrigerator revenue allocation using the stand-alone method with selling price as the weight.

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