Chapter 15, Problem 15.25E

Revenue allocation, bundled products. Couture Corp sells Samsung 7 cases. It has a Men’s Division and a Women’s Division. Couture is now considering the sale of a bundled product called Dynamic Duo consisting of Smarty, a men’s case, and Sublime, a women’s case. For the most recent year, Couture sold equal quantities of Smarty and Sublime and reported the following:

1. 1. Allocate revenue from the sale of each unit of Dynamic Duo to Smarty and Sublime using the following: Required
   1. a. The stand-alone revenue-allocation method based on selling price of each product
   2. b. The incremental revenue-allocation method, with Smarty ranked as the primary product
   3. c. The incremental revenue-allocation method, with Sublime ranked as the primary product
   4. d. The Shapley value method
2. 2. Of the four methods in requirement 1, which one would you recommend for allocating Couture’s revenues to Smarty and Sublime? Explain.