Question

Destin Company signs a contract to manufacture a new 3D printer for \(80,000. The contract includes installation which costs \)4,000 and a maintenance agreement over the life of the printer at a cost of $10,000. The printer cannot be operated without the installation. Destin Company as well as other companies could provide the installation and maintenance agreement. What are Destin Company’s performance obligations in this contract?

Short answer

This contract has three performance obligations such as3-D printer manufacturing, installation services, and maintenance services.

Step-by-step solution

Performance Obligations

The obligations stipulated by both parties' mutual contract to do something under legal guidance are known as performance obligations. This requires the parties to fulfill their duties within a given period.

Performance obligations under this contract

Under this contract, there are three performance obligations

1. They must manufacture 3-D printers for $80,000.
2. They have another obligation to install printers.
3. The third obligation for Destin company is a maintenance agreement.

Both parties must fulfill their duties within the stipulated time frame. If one party does not perform their duty, the other can file a case in court.