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

question 14

Essay

Max's DVD Store encounters revenue-allocation decisions with its bundled product sales. Here, two or more of the DVDs 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:

Party Achieving

The act of completing or fulfilling a task or goal, typically used in the context of an individual or group's success.

Neutral

An impartial or unbiased stance, without taking sides in a contest, dispute, or conflict.

Dysfunctional Conflict

Is destructive and hurts task performance.

Task Performance

Involves the execution and completion of specific duties or the achievement of goals within an assigned role or job.