Max's DVD Store encounters revenue allocation decisions with its bundled product sales. Here, two or more of the DVDs are sold as a single package. Managers at Max's are keenly interested in individual product profitability figures. Information pertaining to its three bundled products and the stand-alone selling prices of its individual products is as follows:

Required:
a. With selling prices as the weights, allocate the $25 packaged price of "All Three"
to the three videos using the stand-alone revenue allocation method.
b. Allocate the $25 packaged price of "All Three"
to the three types of videos using the incremental revenue allocation method. Assume New Releases is the primary product, followed by Older Releases, and then Classics.

Question

Max's DVD Store encounters revenue allocation decisions with its bundled product sales. Here, two or more of the DVDs are sold as a single package. Managers at Max's are keenly interested in individual product profitability figures. Information pertaining to its three bundled products and the stand-alone selling prices of its individual products is as follows:
  
Required:
a. With selling prices as the weights, allocate the $25 packaged price of "All Three"
to the three videos using the stand-alone revenue allocation method.
b. Allocate the $25 packaged price of "All Three"
to the three types of videos using the incremental revenue allocation method. Assume New Releases is the primary product, followed by Older Releases, and then Classics.

Quizplus · Accepted Answer

The Answer of Max's DVD Store encounters revenue allocation decisions with its bundled product sales. Here, two or more of the DVDs are sold as a single package. Managers at Max's are keenly interested in individual product profitability figures. Information pertaining to its three bundled products and the stand-alone selling prices of its individual products is as follows:
  
Required:
a. With selling prices as the weights, allocate the $25 packaged price of "All Three"
to the three videos using the stand-alone revenue allocation method.
b. Allocate the $25 packaged price of "All Three"
to the three types of videos using the incremental revenue allocation method. Assume New Releases is the primary product, followed by Older Releases, and then Classics.

Max's DVD Store Encounters Revenue Allocation Decisions with Its Bundled