The allocation of prices for multiple obligations is a difficult task. It requires a lot of calculation and can be very tricky. In this blog post, we will discuss how to allocate prices for multiple performance obligations. We will also go over the importance of getting it right and some easy tips on doing so! In order to allocate a price for multiple performance obligations, one must first break down each obligation into smaller components. Each component should be given an individual transaction price that can then be used to calculate the overall allocation of prices. For example, if you have three different types of services in your agreement, these are: 50% labor cost and 30% materials cost with 20% profit margin on all labor costs. Allocation is done by adding up how much money was spent on material (total amounts) times the percentage it will represent for total contract value (materials’ share), this equals 60%. The sum of all contributions from both parties is also multiplied by their assigned percentages divided by 100 which equals 40%. These numbers would now be totaled together
