Individual product-profitability
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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:
Stand-Alone
Selling Price
Cost
Package
Packaged
Price
Reading Fun
$50
$7.20
1. Reading Fun & Math Fun
$88
Math Fun
$60
$8.00
2. Reading Fun & Analysis
$112
Analysis
$90
$10.00
3. All three
$152
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.
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Solution Summary
Solution contains calculation of amount of revenue that will be allocated to the product using the incremental method for revenue allocation.
Solution Preview
Hi,
Please see the response to your posting as below:
Prices:
Reading Fun $50
Math Fun $60
Reading Fun & Math Fun $88
Primary product: Reading ...
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