Question 1

Revenue tracing results in a more accurate assignment of revenues to products, than does revenue allocation.

Accepted Answer

Revenue tracing involves direct identification and measurement of specific revenue sources, whereas revenue allocation involves indirect distribution of revenues based on certain criteria. Therefore, revenue tracing is generally considered to be more accurate and precise than revenue allocation.

Question 2

Which of the following statements is TRUE?

Accepted Answer

The two main classes of revenue allocation methods are indeed the stand-alone method and the incremental method.

Question 3

The stand-alone method may use selling price or unit costs to allocate revenues.

Accepted Answer

The stand-alone method can use either selling price or unit costs to allocate revenues to each component of a bundled product or service.

Question 4

Revenue allocation occurs where revenues can be identified with an individual product (service, customer, and so on)in an economically feasible (cost-effective)way.

Accepted Answer

The answer of Revenue allocation occurs where revenues can be...

Question 5

It is most appropriate to base revenue allocation on the number of physical units when individual products in the bundle are of unequal value.

Accepted Answer

Allocating revenue based on the number of physical units is not appropriate when products have unequal value, as it does not reflect the true value of each product in the bundle.

Question 6

The ranking of products with regard to the incremental revenue allocation method can only be done by top management.

Accepted Answer

The ranking of products using the incremental revenue allocation method can be performed by any qualified personnel, not just top management, as it involves analyzing financial data and applying specific accounting principles.

Question 7

Revenue allocation is required to determine the profitability of individual items within a bundled product.

Accepted Answer

Revenue allocation helps to determine the profitability of individual items within a bundle by assigning revenue to each component based on its fair value. This enables businesses to evaluate the contribution of each component to overall profitability and make informed decisions about pricing and product strategy.

Question 8

________ is a package of two or more products or services, sold for a single price, where the individual components of the package may also be sold as separate items, each with their own stand-alone price.

Accepted Answer

A bundled product is a package of two or more products or services sold for a single price, where the individual components of the package may also be sold as separate items, each with their own stand-alone price. This allows businesses to offer customers a discounted price for buying multiple items together, while still being able to sell each item individually at its regular price.

Question 9

The incremental revenue-allocation method uses product specific information pertaining to products in the bundle to determine the weights used to allocate the bundled revenues to those individual products.

Accepted Answer

The answer of The incremental revenue-allocation method uses product specific...

Question 10

A bundled product is a package of two or more products or services, sold for a single price, where the individual components of the bundle may also be sold as separate items, each with their own stand-alone prices.

Accepted Answer

A bundled product is exactly as described in the statement.

Question 11

An example of a bundled product is when a resort hotel charges a single price for lodging, food, and recreational activities.

Accepted Answer

This is a correct example of a bundled product.

Question 12

________ ranks the individual products in a bundle and then uses this ranking to allocate the bundled revenues to these individual products.

Accepted Answer

The incremental revenue allocation method ranks the individual products in a bundle and allocates the bundled revenues based on this ranking. This method is based on the principle that the revenue generated by each product in the bundle is incremental to the revenue that would be generated by the other products in the absence of that product. This method is commonly used in situations where the products in the bundle are complementary, and the revenue generated by the bundle as a whole is greater than the sum of the revenues generated by the individual products on a standalone basis.

Question 13

Which of the following statements is TRUE?

Accepted Answer

Revenue tracing directly links revenues to specific products, providing a more accurate assignment than revenue allocation, which distributes revenues based on a predetermined formula.

Question 14

________ occurs where revenues, related but not traceable to individual products (service, customer, and so on), are assigned to those individual products.

Accepted Answer

Revenue allocation is the process of assigning revenues, which are related but not traceable to individual products, to those individual products. This is often done in situations where a company offers bundled products or services, and needs to determine how much revenue should be attributed to each component of the bundle.

Question 15

Under the incremental revenue allocation method, there is an incentive to be the first-ranked user.

Accepted Answer

Under incremental revenue allocation method, the first-ranked user gets a bigger share of the revenue which provides an incentive to be the first-ranked user.

Question 16

When allocating the revenues between a bundled product offering, there are only two methods which can be used: 1)the stand-alone revenue-method and 2)the incremental revenue-allocation method.

Accepted Answer

The answer of When allocating the revenues between a bundled...

Question 17

The first-ranked product is termed the incremental product in the incremental revenue-allocation method.

Accepted Answer

The first-ranked product is termed the primary product, not the incremental product, in the incremental revenue-allocation method.

Question 18

________ uses product specific information pertaining to products in the bundle to determine the weights used to allocate the bundled revenues to those individual products.

Accepted Answer

The stand-alone revenue allocation method uses product-specific information to determine the weights for allocating bundled revenues to individual products.

Question 19

The stand-alone revenue allocation method pertains to products that cannot be bundled together.

Accepted Answer

The stand-alone revenue allocation method is used to allocate revenue to individual products within a bundle, not for products that cannot be bundled.

Question 20

The stand-alone revenue allocation method is a weighted-average method.

Accepted Answer

The stand-alone revenue allocation method is indeed a weighted-average method, as it calculates the standalone selling price by weighting the prices of all observable inputs (e.g. prices charged for similar products, expected cost plus a margin, etc.) based on their relative importance or significance. This weighted-average approach ensures that the standalone selling price reflects the individual characteristics of the product or service being sold, as well as the market conditions and other relevant factors that affect its value.

Quiz 16: Revenue and Customer Profitability Analysis

Revenue tracing results in a more accurate assignment of revenues to products, than does revenue allocation.

Which of the following statements is TRUE?

The stand-alone method may use selling price or unit costs to allocate revenues.

Revenue allocation occurs where revenues can be identified with an individual product (service, customer, and so on)in an economically feasible (cost-effective)way.

It is most appropriate to base revenue allocation on the number of physical units when individual products in the bundle are of unequal value.

The ranking of products with regard to the incremental revenue allocation method can only be done by top management.

Revenue allocation is required to determine the profitability of individual items within a bundled product.

________ is a package of two or more products or services, sold for a single price, where the individual components of the package may also be sold as separate items, each with their own stand-alone price.

The incremental revenue-allocation method uses product specific information pertaining to products in the bundle to determine the weights used to allocate the bundled revenues to those individual products.

A bundled product is a package of two or more products or services, sold for a single price, where the individual components of the bundle may also be sold as separate items, each with their own stand-alone prices.

An example of a bundled product is when a resort hotel charges a single price for lodging, food, and recreational activities.

________ ranks the individual products in a bundle and then uses this ranking to allocate the bundled revenues to these individual products.

Which of the following statements is TRUE?

________ occurs where revenues, related but not traceable to individual products (service, customer, and so on) , are assigned to those individual products.

Under the incremental revenue allocation method, there is an incentive to be the first-ranked user.

When allocating the revenues between a bundled product offering, there are only two methods which can be used: 1)the stand-alone revenue-method and 2)the incremental revenue-allocation method.

The first-ranked product is termed the incremental product in the incremental revenue-allocation method.

________ uses product specific information pertaining to products in the bundle to determine the weights used to allocate the bundled revenues to those individual products.

The stand-alone revenue allocation method pertains to products that cannot be bundled together.

The stand-alone revenue allocation method is a weighted-average method.