Eastman Kodak used to sponsor a car in the NASCAR races. Like other major corporations that sponsor sports events, Kodak believes that the publics awareness of its products is enhanced by sponsoring a NASCAR. For the right to have the car painted yellow with Kodak displayed prominently over the automobile, Kodak pays millions of dollars annually to the racing team.

Kodak is organized around about 25 business units that are profit centers. All Kodak products are sold by the business units. Senior management at Kodak believes that since the various business units at Kodak receive the benefits of the NASCAR exposure through greater name recognition, and hence greater sales, the costs of the program should be allocated back to the business units and ultimately to all Kodak products. The cost of the NASCAR program is allocated back to the Kodak business units based on sales revenue. Suppose the allocation is 10 percent of revenues, i.e. for every $1 of revenue, the business unit is allocated $0.10 of cost.

One of Kodaks business units sells X-ray film in 100-sheet packages. The following table summarizes possible pricing levels, packages sold at that price, and costs for the various number of packages.

Price	Number of Packages Sold	Total Cost
$564	218	$71,800
562	219	71,900
560	220	72,000
558	221	72,100
556	222	72,200
554	223	72,300
552	224	72,400
550	225	72,500
548	226	72,600

Required:

a. What price-quantity combination maximizes the profits of the X-ray film, ignoring the allocation of NASCAR?

b. If $0.10 of the NASCAR is allocated for every dollar of X-ray revenue, what price-quantity combination of X-ray film maximizes profits after allocating NASCAR costs?

c. What price-quantity combination of X-ray film maximizes profits after allocating NASCAR costs using total costs (instead of revenues), where for every dollar of total costs, $0.20 of NASCAR costs are allocated?

d. Instead of allocating the NASCAR based on revenues, it is allocated based on profits before allocated costs. For every $1.00 of profits before allocated costs, $0.30 of NASCAR costs are allocated. Now what price-quantity combination maximizes X-ray profits after allocating NASCAR costs?

e. Should NASCAR costs be allocated to the business units, and if so, what allocation scheme should be used (revenues, costs, or profits)?