Exam 16: Revenue and Customer Profitability Analysis

Answer the following questions using the information below: Elmo's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows: Assume Reading Fun is the primary product, followed by Math Fun, and then Analysis. -Using the stand-alone method with selling price as the weight for revenue allocation, what amount of revenue will be allocated to Math Fun in the package that contains all three products?

Costs incurred to handle each unit sold would MOST likely be classified as a

A company sells three different types of satellite dishes in Ontario, but sells only (type 1) in Alberta. Available data are that the budgeted sales mix percentage in Ontario is .35(type 1), and .25(type 2). The contribution margins per unit are $200 (1), $120 (2), and $140(3). Required: Calculate the budgeted contribution margin per composite unit for the budgeted mix for Ontario and Alberta respectively.

Companies that only record the invoice price can usually track the magnitude of price discounting.

Which of the following is one of the items that are important to managers when analyzing sales-volume variance information?

A customer cost hierarchy may include customer-sustaining costs.

The measures used to compute market size and share are debated intensely in the television industry, but generally, a TV station's ability to charge premium prices for airtime increases as its audience size increases. Explain how the sales and market variances might be relevant in this situation.

Use the information below to answer the following question(s). John's Video Game Outlet encounters revenue-allocation decisions with its bundled product sales. Here, two or more of the video games are sold as a single package. Managers at John's are keenly interested in individual product-profitability figures. Information pertaining to its three bundled products and the stand-alone prices of its individual products is as follows: The unit manufacturing costs are $3.60, $4.00, and $5.00 for games A, B, and C, respectively. -Calculate the allocation of packaged price Game A in Package 3, using selling prices as the base.

List at least three different levels of costs in a customer-cost hierarchy and an example of each.

Use the information below to answer the following question(s). Special Tea Products (STP) has an exclusive contract with Tea Distributors. Two brands of Teas are imported, Strong and Mild, and sold to retail outlets. The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea. The following information is provided for the month of May: Budgeted fixed costs are $1,750. Actual fixed costs are $2,000. -What is the STP total sales-volume variance (contribution margin) for May?

Use the information below to answer the following question(s). Special Tea Products (STP) has an exclusive contract with Tea Distributors. Two brands of Teas are imported, Strong and Mild, and sold to retail outlets. The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea. The following information is provided for the month of May: Budgeted fixed costs are $1,750. Actual fixed costs are $2,000. -What is the STP sales-volume variance (contribution margin) for Strong tea?

Why would businesses want to sell bundled products? What benefits, if any, are there for the consumer?

When allocating the revenues between a bundled product offering, there are only two methods which can be used: 1) the stand-alone revenue-method and 2) the incremental revenue-allocation method.

Revenue tracing results in a more accurate assignment of revenues to products, than does revenue allocation.

Managers find customer-profitability analysis useful because it frequently highlights how vital a small set of customers is to total profitability.

The Omega Corporation manufactures two types of vacuum cleaners: the ZENITH for commercial building use and the House-Helper for residences. Budgeted and actual operating data for the year are as follows: Required: a. Calculate the contribution margin for the flexible budget. b. Determine the total static-budget variance, the total flexible-budget variance, and the total sales-volume variance in terms of the contribution margin.

Use the information below to answer the following question(s). Remote Company manufactures remote control devices for electronic equipment. The following information was collected during June: -What is the company's market-share variance?