Resolved: Allocate the transaction price
in the lesson, why isnt allocate the transaction price base on the actual contractual amount? (instead it is based on the percentage out of the total amount of machines delievered). the first contract worth $14000, and add the transportation cost $1400, the transaction price that should be allocated to contract 1 is $15,400.
1 answers ( 1 marked as helpful)
Hi,
In this particular case, the transportation cost applies to both contracts. Therefore, we need to allocate the total cost of 20,200 (including the transportation cost) to Contract 1 or Contract 2. The fair way to do that is by using the number of units (180) and allocating the price proportionally, 40/140.
The unit price in the two contracts is different, so the allocation base should not be price/unit but quantity.
I hope this helps.
Best,
Antoniya