How the Standalone Selling Price Is Estimated Using the Residual Approach

When you submit the Identify Customer Contracts process, the process estimates the standalone selling price for the resulting performance obligation if one of these points is true:

• The performance obligation consists of at least one order line with a Use Residual Approach designation.
• The performance obligation is identified in a performance obligation template designated as Use Residual Approach.

The computed residual standalone selling price represents the extended standalone selling price that Revenue Management estimated using the residual standalone selling price estimation method. The Unit SSP is calculated as: Computed Residual SSP/Quantity.

Revenue Management calculates the residual standalone selling price as the total transaction price minus the sum of the known standalone selling price of other goods or services promised in the contract. When two or more performance obligations within the contract require that the standalone selling price be estimated using the residual approach, the computed residual standalone selling price is allocated to the obligations based on the selling price of the individual obligations.

The extended standalone selling price is set to the computed residual standalone selling price and is used to allocate the contract revenue across the performance obligations. If the computed residual standalone selling price is negative, the negative result is displayed in the Computed Residual SSP column in the Edit Customer Contract page, and the extended standalone selling price is set to zero.