Revenue allocation, bundled products. Yves Parfum Company blends and sells designer fragrances. It has a Mens Fragrances

Question:

Revenue allocation, bundled products. Yves Parfum Company blends and sells designer fragrances. It has a Men’s Fragrances Division and a Women’s Fragrances Division, each with different sales strategies, distribution channels, and product offerings. Yves is now considering the sale of a bundled product consisting of a men’s cologne and a women’s perfume. For the most recent year, Yves reported the following:

Product Monaco (men's cologne) Innocence (women's perfume) L'Amour (Monaco + Innocence) Retail Price $ 80 120 180

1. Allocate revenue from the sale of each unit of L’Amour to Monaco and Innocence using:

a. The stand-alone revenue-allocation method based on selling price of each product

b. The incremental revenue-allocation method, with Monaco ranked as the primary product

c. The incremental revenue-allocation method, with Innocence ranked as the primary product

d. The Shapley value method, assuming equal unit sales of Monaco and Innocence.

2. Of the four methods in requirement 1, which one would you recommend for allocating L’Amour’s revenues to Monaco and Innocence? Explain.

Distribution
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