Elmo's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows:
1. Reading Fun & Math Fun
2. Reading Fun & Analysis
3. All three
Using the incremental method for revenue allocation, what amount of revenue will be allocated to Reading Fun in the first package (Reading Fun & Math Fun)? Assume Reading Fun is the primary product, followed by Math Fun, and then Analysis.
Please see the response to your posting as below:
Reading Fun $50
Math Fun $60
Reading Fun & Math Fun $88
Primary product: Reading ...
Solution contains calculation of amount of revenue that will be allocated to the product using the incremental method for revenue allocation.