Question

Dang Inc. produces and sells DVDs to business peaple and students who are planning extended stays in China. It has been very successful with two DVDs: Beginning Mandarin and Conversational Mandarin. It is introducing a third DVD. Reading Chinese Characters. It has also decided to market its new DVD in two different packages grouping the Reading Chinese Characters DVD with each of the ather two language DVDs. Information about the separate DVDs and the packages follow Click the loon to view the information.) Read the touirements Requirement 1. Using the seling prices, allocate revenues from the Begm + RCC package to each DVD In the package using la) the stand-alone method: (with BagM and RCC in tur 88 the primary product. (Round your answers to the nearest cent) BegM RCC (a) Stand-alone (b) Incremental: Beg primary user (b) Incremental: RCC primary user A Data Table A Requirements DVD Selling Price 42 $ S 112 1. Using the selling prices, alocate revenues from the BogM + RCC package to each DVD in that package using (a) the stand-alone method, and (b) the incremental method, with BegM and RCC in turn as the primary product. 2. Using the saling prices, alocate revenues from the ConM. RCC package to cach DVD in that package using (a) the stand-alone method; and (b) the incremental method, with ConM and RCC in turn as the primary product 3. Which method is most appropriate for allocating revenues among the DVDs? Why? Beginning Mandarin (BegM) Conversational Mandarin (ConM) Reading Chinese Characters (RCC) Beg MRCC ConM+ RCC $ 28 50 $ S 131 Print Done Print Done

Answer 1

Answer:

1(a). Stand- Alone Method for the Beg M + RCC package

DVD	Seperate Revenue	Percentage	Joint Revenue	Allocation
Beg M	$ 42	60%	$ 60	$ 36
RCC	$ 28	40%	$ 60	$ 24
Total	$ 70	100%		$ 60

1(b). Incremental Method

i. Beg M First

DVD	Allocation Revenue (Beg M First)	Revenue Remaining to Allocate
Beg M	$ 42	$ 60 - $ 42 = $ 18
RCC	$ 18	-
Total	$ 60	-

ii. RCC First

DVD	Allocation Revenue (RCC First)	Revenue Remaining to Allocate
Beg M	$ 28	$ 60 - $ 28 = $ 32
RCC	$ 32	-
Total	$ 60	-

2(a). Stand- Alone Method for the ConM + RCC package

DVD	Seperate Revenue	Percentage	Joint Revenue	Allocation
ConM	$ 112	80%	$ 130	$ 104
RCC	$ 28	20%	$ 130	$ 26
Total	$ 140	100%		$ 130

2(b). Incremental Method

i. Con M First

DVD	Allocation Revenue (Beg M First)	Revenue Remaining to Allocate
Con M	$ 112	$ 130 - $ 112 = $ 18
RCC	$ 18	-
Total	$ 130	-

ii. RCC First

DVD	Allocation Revenue (RCC First)	Revenue Remaining to Allocate
RCC	$ 28	$ 130 - $ 28 = $ 102
Beg M	$ 102	-
Total	$ 130	-

3) The Stand Alone Method will be preferable since it is similar and easier to explain.

The incremental methods will be appropriate if one DVD has a more demand than the other DVD.

In this Situation, the demanded DVD will be sold anyway so it should receive its stand-alone revenue,

and the other DVD shoud receive the remainder.