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$21	$3.75		1. Reading Fun​ & Math Fun	$49
Math Fun	$ 38$38	$4.50		2. Reading Fun​ & Analysis	$ $58
Analysis	$ 51$51	$5.20		3. All three	$ $86

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. $36.72

B. $29.71

C. $38.00

D. $ 20.92

Answer 1

Answer - c) $38.00

Under Incremental method, the allocations are based on significance of the product in various product in that business. In this case it is given that primary product is reading fun, followed by math fun, and then analysis. So, we have to allocate the revenue on that basis.

Reading Fun will gets $ 21 from total revenue of $ 86

Math Fun will gets $ 38 from total revenue of $ 86 (becuase revenue is available for him)

Analysis gets will $ 27 (86-21-38) from total revenue of $ 82.