CPA PEP Prep Q&A
ASPE Section 3400 Revenue Quiz
- The daily rate quote is $1,200 x 5 days in contract = $6,000
- The extra service is $100 x 30 employees in contract = $3,000 (includes software and meeting combined)
- Total contract value of all components should be $6,000 + $3,000 = $9,000,
- but he is only charging $1,600 x 5 = $8,000 for the combined contract
- You need to multiply up because each component is charged based on a different base (days vs. employees)
- 2/3 of total is for the one-day training and 1/3 is for the meeting with employees (software is not separated based on "might be sold")
- 1/3 x $8,000(amt charged) / 30 employees = $88.9
Thank you Jennifer for the response. The clarity of your computation is superb!
Observation: If you have not experience or encounter this type of scenario or question before, there is a lot of possibility to confuse the students with the way the question was worded plus the confusing context of the software: for example, I thought there is just one software that does the tracking for all the 30 employees; also the wording looked like that the total contract price is $1,600 for all - five one-day training sessions to employees in various locations, as well as a weekly program designed for each of SUN's 30 employees, and software that can be used with the program to track individual performance.
I would really appreciate other comments on this observation on how these kind of wordings could confuse us as well as the strategy(ies) that students should put in mind and use to guide them in the right direction.