Roper's Cablevision encounters revenue-allocation decisions with its bundled product sales. Here, two or more of its services are sold as a single package. Managers at Roper's are keenly interested in individual product-profitability figures. Information pertaining to its three bundled products and the stand-alone prices of its individual products is as follows:
The unit variable costs are estimated at $4.00, $3.00, and $2.50 for Sports, Lifestyle, and TV Classics, respectively. In all cases, Sports is considered to be the primary product.
Required:
a. Allocate the bundled revenue to each product in the 'Sports & Classics' bundle, using selling prices as the base.
b. What is the allocated revenue to the Sports in each bundle, using the incremental revenue-allocation method?

Question

Roper's Cablevision encounters revenue-allocation decisions with its bundled product sales. Here, two or more of its services are sold as a single package. Managers at Roper's are keenly interested in individual product-profitability figures. Information pertaining to its three bundled products and the stand-alone prices of its individual products is as follows:
  The unit variable costs are estimated at $4.00, $3.00, and $2.50 for Sports, Lifestyle, and TV Classics, respectively. In all cases, Sports is considered to be the primary product.
Required:
a. Allocate the bundled revenue to each product in the 'Sports & Classics' bundle, using selling prices as the base.
b. What is the allocated revenue to the Sports in each bundle, using the incremental revenue-allocation method?

Quizplus · Accepted Answer

The Answer of Roper's Cablevision encounters revenue-allocation decisions with its bundled product sales. Here, two or more of its services are sold as a single package. Managers at Roper's are keenly interested in individual product-profitability figures. Information pertaining to its three bundled products and the stand-alone prices of its individual products is as follows:
  The unit variable costs are estimated at $4.00, $3.00, and $2.50 for Sports, Lifestyle, and TV Classics, respectively. In all cases, Sports is considered to be the primary product.
Required:
a. Allocate the bundled revenue to each product in the 'Sports & Classics' bundle, using selling prices as the base.
b. What is the allocated revenue to the Sports in each bundle, using the incremental revenue-allocation method?

Roper's Cablevision Encounters Revenue-Allocation Decisions with Its Bundled Product Sales