Use the information below to answer the following question(s).John's Video Game Outlet encounters revenue-allocation decisions with its bundled productsales. Here, two or more of the video games are sold as a single package. Managers atJohn's are keenly interested in individual product-profitability figures. Informationpertaining to its three bundled products and the stand-alone prices of its individualproducts is as follows:Stand-Alone Sales PricePackageGame AGame BGame CPackagedPricePackage 1$25$30N/A$44Package 225N/A$4556Package 325304576The unit manufacturing costs are $3.60, $4.00, and $5.00 for games A, B, and C,respectively.21) Calculate the allocation of packaged price for Game A in Package 1, using selling pricesas the base.BDiff: 2Type: MC Show Get answer to your question and much more Skill:ApplyObjective:LO 16-1 Test Prep This preview shows page 8 - 9 out of 9 pages. 7) The method that ranks individual products in a bundle forrevenue allocation is the:A) stand-alone revenue-allocation methodB) incremental revenue-allocation method C) unit-cost weighting methodD) physical-unit weighting method Answer: B8) Approaches used to rank products for revenue allocationmight include: Get answer to your question and much more 9) To give more weight to the product that most likely drivesthe sales of the bundled product, the revenue allocationshould be weighted using: Get answer to your question and much more 10) The revenue allocation may be weighted using physicalunits when:A) the individual products within the bundle haveapproximately the same valueB) selling prices are unstable and unit costs are difficult tocalculateC) other methods cannot be used for various reasons D) All of these answers are correct.Answer: D We have textbook solutions for you! The document you are viewing contains questions related to this textbook. Managerial Accounting Warren/Tayler 11) Using the stand-alone method with selling price as theweight for revenue allocation, what amount of revenue willbe allocated to Reading Fun in the first package (ReadingFun & Math Fun)?12) Using the incremental method for revenue allocation,what amount of revenue will be allocated to Reading Fun inthe first package (Reading Fun & Math Fun)? AssumeReading Fun is the primary product, followed by Math Fun,and then Analysis.13) Using the stand-alone method with selling price as theweight for revenue allocation, what amount of revenue willbe allocated to Math Fun in the package that contains allthree products?B) $30.00C) $22.80D) $25.33Answer: CExplanation: C) [$30 / ($25 + $30 + $45)] × $76 = $22.8014) Using the incremental method, what amount ofrevenue will be allocated to Math Fun in the package thatcontains all three products?A) $24.12B) $30.00C) $22.80D) $25.33Answer: BExplanation: B) $76 - $25 primary product = $51 revenuesremaining to be allocated to other products; $30 sincethere are revenues remaining to cover the selling price ofReading Fun, the first incremental product.15) Using the stand-alone method with selling price as theweight for revenue allocation, what amount will beallocated to the refrigerator? End of preview. Want to read all 9 pages? Upload your study docs or become a Course Hero member to access this document We have textbook solutions for you!The document you are viewing contains questions related to this textbook. The document you are viewing contains questions related to this textbook. Managerial Accounting Warren/Tayler Expert Verified What are the 3 allocation methods?There are three methods for allocating service department costs: direct, sequential, and reciprocal. The first step of each method is to classify each organizational unit as either an operating or service department.
What is stand alone revenue allocation method?The stand-alone cost method allocates group costs to users as a proportion of the costs that would have been individually incurred by each user. This approach is a relatively simple and understandable method for allocating costs.
What is the direct allocation method?The direct allocation method is a technique for charging the cost of service departments to other parts of a business. This concept is used to fully load operating departments with those overhead costs for which they are responsible.
What are the two common allocation methods?The plantwide and department allocation methods are “traditional” approaches because both typically use direct labor hours, direct labor costs, or machine hours as the allocation base, and both were used prior to the creation of activity-based costing in the 1980s.
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