16.6 Bundled products and revenue allocation methods Flashcards
inflows of assets received for products or services provided to customers
revenues
when revenues are related to a particular revenue object but cannot be traced to it in an economically feasible (cost effective) way
revenue allocation
anythign for which a seperate measurement of revenue is desired (products, customers, and divisions)
revenue object
a package of two or more products (or services) that is sold for a single price but whose individual components may be sold as seperate items at their own “stand alone” prices
bundled product
uses product specific information on the produts in the bundle as weights for allocating the bundled revenues to the individual products
stand alone revenue allocation method
3 weights for the stand-alone method
- selling price
- units costs
- physical units
which method do managers prefer
selling prices method
bc the weights explicity consider the prices customers are willing to pay for the individual products
which method is used if managers cant use any of the other methods
physical units
ranks individual products in a bundle according to criteria determined by management and then uses this ranking to allocate bundled revenues to individual products
incremental revenue allocation method
the first ranked product in the incremental method
primary product
the second ranked product in the incremental method
first incremental product
the third ranked product in the incremental method
second incremenal product
