Question

Buzz'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	$21	$3.80		1. Reading Fun & Math Fun	$48
Math Fun	$37	$4.15		2. Reading Fun & Analysis	$55
Analysis	$48	$5.30		3. All three	$82

Using the incremental method, what amount of revenue will be allocated to Math Fun in the package that contains all three products? Assume Reading Fun is the primary product, followed by Math Fun, and then Analysis. (Do not round any intermediary calculations.)

	A.	$20.89
	B.	$37.00
	C.	$28.62
	D.	$35.69

Answer 1

Answer :

Allocation of revenue to Math Fun

Total revenue of three product if sold individually

= $21 + $37 + $48

= $106

Therefore allocation of revenue to Math fun based on revenue proportion

= Packaged revenue / total individually revenue * Revenue of Math fun

= $82/106*37

= $28.62

Option (C) is the correct answer