Wentworth Video Parlour encounters revenue-allocation decisions with its bundled product sales.Here,two or more of the movie DVDs are sold as a single package.Managers at Wentworth 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 DVDs using the stand-alone revenue-allocation method.
b.Allocate the $25 packaged price of 'All Three' to the three types of DVDs using the incremental revenue-allocation method.Assume New Releases is the primary product,followed by Older Releases,and then Classics.
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