Software for You Encounters Revenue-Allocation Decisions with Its Bundled Product

question 26

Essay

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:
$$\begin{array}{l}\begin{array} { | l | c | c | } \hline & \begin{array} { c } \text { Stand-Alone } \\\text { Selling Price, }\end{array} & \text { Cost } \\\hline \begin{array} { l } \text { Word Processing } \\\text { (WP) }\end{array} & \$ 125 & \$ 18 \\\hline \text { Spreadsheet (SS) } & \$ 150 & \$ 20 \\\hline \begin{array} { l } \text { Accounting Software } \\\text { (AS) }\end{array} & \$ 225 & \$ 25 \\\hline\end{array}\\\\\begin{array} { | c | c | } \hline \text { Package } & \text { Packaged Price } \\\hline \text { WP \& SS } & \$ 220 \\\hline \text { WP \& AS } & \$ 280 \\\hline \text { All three } & \$ 380 \\\hline\end{array}\end{array}$$ 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.

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Definitions:

Business Managers

Individuals responsible for overseeing and directing the operations of a business to achieve its goals.

Strong AI

Hypothetical artificial intelligence that matches or exceeds human intelligence and could perform any intellectual task that humans can.

Weak AI

Artificial intelligence focused on a narrow task, in contrast to strong AI, which exhibits human-like intelligence across a range of cognitive tasks.

Customer Relationship Management

A technology for managing all your company's relationships and interactions with customers and potential customers.