Concept explainers
Allocation of Variable Consideration. Green-Up Inc contracts with a building manager to provide goods and services to enhance the energy efficiency It offers consulting services, including recommending ways to increase energy efficiency and monitor performance It also provides items such as thermostats and automatic light switches as part of the contract Green- Up charges 60% of the reduction in energy usage during the first year as a consulting fee Green- Up determines that the consulting services compose one performance obligation and the items provided are another performance obligation The estimated standalone selling prices are $180,000 for the consulting services and $100,000 for the items to increase energy efficiency The stated price in the contract for the items provided is a fixed payment of $60,000 The pnce stated for the consulting fees is 60% of the customer's reduction in future energy costs Green-Up estimates that the customer will reduce its energy usage by $500,000 The customer s actual energy reduction is $550,000 What amount of the transaction price should Green-Up allocate to each performance obligation?
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