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

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