Max's Movie Store Encounters Revenue-Allocation Decisions with Its Bundled Product

question 119

Essay

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:

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.

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Definitions:

Gallup Poll

An opinion poll conducted by the Gallup Organization, known for its public opinion surveys on political, social, and economic issues.

Intrinsic Reward

A type of motivation derived from internal satisfaction or the pleasure in performing an activity, rather than external factors.

Sense of Accomplishment

A feeling of pride and fulfillment that comes from achieving something significant or completing a task.

Incentive Compensation

A form of remuneration designed to reward employees for achieving specific performance targets or objectives, often aimed at motivating higher levels of productivity.