Fundamentals of Cost and Management Accounting Assignment

Topics: Allocation Pages: 10 (2221 words) Published: April 4, 2013
Fundamentals of Cost and Management Accounting
Part Four: Allocation of Support Department Costs, Common Costs and Revenues Exercise No. 4
الاسم: الرقم الأكاديمي: رقم الشعبة: Choose the best answer for every question of the following questions: 1) Max's Movie Store encounters revenue-allocation decisions with its bundled product sales. Here, two or more of the movie videos are sold as a single package. Managers at Max's 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:

| Stand-Alone Selling Price,| Cost| | Package| Packaged Price| New Releases| \$15| \$2.00| | New & Older| \$20|
Older Releases| \$10| \$1.50| | New & Classics| \$17| Classics| \$8| \$1.25| | All three| \$25|

Required:
a.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.

b.Allocate the \$25 packaged price of "All Three" to the three types of videos using the incremental revenue-allocation method. Assume New Releases is the primary product, followed by Older Releases, and then Classics.

a.New \$15 + Older \$10 + Classics \$8= \$33.00

New \$15 / \$33 × \$25= \$11.36
Old \$10 / \$33 × \$25= \$ 7.58
Classics \$8 / \$33 × \$25= \$ 6.06
Total\$25.00

b.
Product| Revenue Allocated| Revenue Remaining To Be Allocated| New Releases| \$15| \$25 - \$15 = \$10|
Older Releases| \$5 (\$20-\$15)| \$25-\$15-\$5 = \$5|
Classics| \$5 (\$25-\$20)| none|
Total revenue allocated| \$25| |

2) Software For You encounters revenue-allocation decisions with its bundled product sales. Here, two or more units of the software are sold as a single package. Managers at Software For You 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:

| Stand-Alone Selling Price,| Cost| | Package| Packaged Price| Word Processing (WP)| \$125| \$18| | WP & SS| \$220| Spreadsheet (SS)| \$150| \$20| | WP & AS| \$280|
Accounting Software (AS)| \$225| \$25| | All three| \$380| Required:
a.Using the stand-alone revenue-allocation method, allocate the \$380 packaged price of "All Three" to the three software products
1.with selling prices as the weights.
2.with individual product costs as the weights.
3.based on physical units.

b.Allocate the \$380 packaged price of "All Three" to the three software products using the incremental revenue-allocation method. Assume Word Processing is the primary product, followed by Spreadsheet, and then Accounting Software. Answer:

a1.WP \$125 + SS \$150 + AS \$225 = \$500

WP \$125 / \$500 × \$380= \$ 95
SS \$150 / \$500 × \$380= \$114
AS \$225 / \$500 × \$380= \$171
Total\$380

a2.WP \$18 + SS \$20 + AS \$25 = \$63

WP \$18 / \$63 × \$380= \$108.57
SS \$20 / \$63 × \$380= \$120.64
AS \$25 / \$63 × \$380= \$150.79
Total\$380.00

a3.1 / (1+ 1 + 1) × \$380 = \$126.67 per software package

b.
Product| Revenue Allocated| Revenue Remaining To Be Allocated| WP| \$125| \$380 -125 = \$255|
SS| \$95(\$220-\$125)| \$380 - \$125 - \$95 = \$160|
AS| \$160| none|
Total revenue allocated| \$380| |
Answer the following questions using the information below:

The Appliance Store sells a refrigerator and a freezer as a single package for \$1,000. Other data are in the chart below.

| Refrigerator| Full-size Freezer| Packaged Price|
Selling price| \$825| \$375| \$1,000|
Manufacturing cost per unit| \$620| \$180| |
Stand-alone product revenues| \$1,225,000| \$775,000| |

3) Using the stand-alone method with selling price as the...