A Company Sells a Software Suite That Includes a Word

question 4

Multiple Choice

A company sells a software suite that includes a word processor and spreadsheet applications. The suite sells for $250 and the items are also available separately for $200 (spreadsheet) and $170 (word processor) . The spreadsheet app is by far the best seller of the standalone product sales. Using the incremental-revenue allocation method and assuming that the spreadsheet is the primary product, how much of the $250 revenue from the bundled product sale would be allocated to the spreadsheet and to the word processing products?

• A) $200 of revenue for the spreadsheet and $50 for the word processor
• B) $200 of revenue for the spreadsheet and $0 for the word processor
• C) $135 of revenue for the spreadsheet and $115 for the word processor
• D) $250 of revenue for the spreadsheet and $0 for the word processor

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Definitions:

Net Income

The total profit of a company after subtracting all expenses, taxes, and costs from its total revenue.

Inventory Method

The approach or system used by a company to track and manage inventory, such as FIFO (First-In, First-Out) or LIFO (Last-In, First-Out).

Notes

A financial document representing an agreement for a borrower to pay back a lender according to specified terms, often detailing the interest rate, repayment schedule, and maturity date.