Business Horizons (BH) produces and markets videos for sale to the business com- munity. It hires well-known business speakers to present new developments in their area of expertise in video format. The compensation paid to each speaker is individu- ally negotiated. It always has a component based on the percentage of revenues from the sale of the video, but that percentage is not uniform across speakers. Moreover, some speakers negotiate separate fixed-dollar payments or multiple-video deals. BH sells most videos as separate items. However, there is a growing trend for videos also to be sold as part of bundled packages. BII offered bundled pack- ages of its three best-selling videos in 2000. Individual and bundled sales of these three videos for 2000 are:

Required 1. Allocate the bundled product revenues to the individual videos using the stand- alone revenue-allocation method (using selling prices as the weights). 2. Describe (without computations) an alternative method of allocating the bundled product revenues to that in requirement 1.

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INDIVIDUAL SALES Units Selling Speaker Speaker Title Sold Price Royalty Jeannett Smith Negotiating for Win-Win 25,000 $150 24% Mark Coyne Marketing for the Internet 17,000 $120 16% Laurie Daley Electronic Commerce 8,000 $130 19% BUNDLED PRODUCT SALES Titles in Bundle Negotiating for Win-Win + Marketing for the Internet Negotiating for Win-Win + Electronic Commerce Marketing for the Internet + Electronic Commerce Negotiating Marketing + Electronic Units Sold Selling Price 12,000 $210 5,000 5220 4,000 $190 11,000 $280