Question

Peter’s Pics encounters revenue-allocation decisions with its bundled movie deal. Here, two or more of the movie videos are sold as a single package. Managers at Peter’s Pics 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:

Individual Products	Stand-Alone Selling Price	Peter's Cost to Acquire		Packages	Packaged Price
New Releases	$15	$2.00		#1 New & Older	$20
Older Releases	$10	$1.50		# 2 New & Classics	$17
Classics	$8	$1.25		#3 All Three (New, Older, & Classics)	$25

With selling prices as the weights, allocate the $25 packaged price of "All Three" to the three videos using the stand-alone revenue-allocation method.

a) new $10.53; older $7.89; classics $6.58

b) new $8.33; older $8.33; classics $8.33

c) new $15.00; older $10.00; classics – 0 -

d) new $11.36; older $7.58; classics $6.06

Answer 1