Question : 19) An example of a bundled product when a computer : 1216991

 

19) An example of a bundled product is when a computer software manufacturer charges a single price for the spreadsheet, word processing, and presentation software. on the same CD.

 

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

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

 

22) Revenue allocation based on the number of physical units is only appropriate when individual products in the bundle are of equal value.

 

23) 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.

24) Give examples of bundled products for each of the following industries:

a.Resort hotel

b.Bank

c.Restaurant

d.Computer store

e.Gasoline service station/convenience store

f.Software manufacturer

 

25) Max’s Movie Store encounters revenue-allocation decisions with its bundled product sales. Here, two or more of the movie videos 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:

 

 

Stand-Alone Selling Price,

Cost

 

Package

Packaged Price

New Releases

$15

$2.00

 

New & Older

$20

Older Releases

$10

$1.50

 

New & Classics

$17

Classics

$8

$1.25

 

All three

$25

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26) Software For You encounters revenue-allocation decisions with its bundled product sales. Here, two or more units of the software are sold as a single package. Managers at Software For You 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:

 

 

Stand-Alone Selling Price,

Cost

 

Package

Packaged Price

Word Processing (WP)

$125

$18

 

WP & SS

$220

Spreadsheet (SS)

$150

$20

 

WP & AS

$280

Accounting Software (AS)

$225

$25

 

All three

$380

 

Required:

a.Using the stand-alone revenue-allocation method, allocate the $380 packaged price of “All Three” to the three software products

1.with selling prices as the weights.

2.with individual product costs as the weights.

3.based on physical units.

 

b.Allocate the $380 packaged price of “All Three” to the three software products using the incremental revenue-allocation method. Assume Word Processing is the primary product, followed by Spreadsheet, and then Accounting Software.