If AC sells an oven with installation and maintenance for $1,000, what amount should be allocated to the maintenance service?

To determine the amount that should be allocated to the maintenance service in this scenario, it is important to recognize how costs are typically allocated for bundled sales. In this case, AC offers an oven that includes both installation and maintenance services for a single price of $1,000. The allocation of the selling price between the different components must be based on the relative standalone selling prices of each component.

If the standalone selling prices of the oven, installation, and maintenance services are known, the total price can be allocated proportionally based on these prices. Assuming that the total allocation for each service adds up to the selling price, you can arrive at the specific portion assigned to maintenance.

In this case, $171 is correct because it appears to reflect a rational allocation based on either percentage calculations or determined market values, which would be consistent with the method used for allocating bundled sales in financial accounting. This method ensures that revenue is recognized in accordance with the economic value provided by each component of the bundle.

Allocating amounts effectively requires comprehensive knowledge of the standalone selling prices so that they properly represent the value assigned to each offering. This approach guarantees accurate financial reporting and adherence to revenue recognition principles in accounting.