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:
Required:
a. Using the stand-alone revenue-allocation method, allocate the $380 packaged price of "All Three" to the three software products
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.
Definitions:
Nonexcludable
A characteristic of a good or service that does not allow the provider to prevent its use by individuals who have not paid for it.
Police Officers
Law enforcement personnel responsible for maintaining public order, preventing and detecting crime, and enforcing laws.
Marginal Cost
The cost of producing one additional unit of a good or service, crucial for optimizing production levels and pricing strategies.
Willingness to Pay
The maximum amount an individual is prepared to spend on a good or service, reflecting the value they attribute to it.
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