Software For You encounters revenue-allocation decisions with its bundled product sales. Here, two or more units of the software are sold as a single package. Managers at Software For You are keenly interested in individual product-profitability figures. Information pertaining to its three bundled products and the stand-alone selling prices of its individual products is as follows:

a. Using the selling prices, allocate revenues from the selling of WP & AS package to each stand-alone software in that package using

i. the stand-alone method,

ii. the incremental method (assume WP is the primary user),

(4 marks)

C. Ideal AA Garment and Sha Taylor are two clothing companies that are considering leasing a dyeing machine together. The companies estimated that in order to meet production, Ideal AA needs the machine for 900 hours and Shah needs it for 600 hours. If each company rents the machine on its own, the fee will be RM40 per hour of usage. If they rent the machine together, the fee will decrease to RM32 per hour of usage.

Required:

a. Calculate Ideal AA and Shah respective share of fees under the stand-alone cost-allocation.

b. Calculate Ideal AA and Shah respective share of fees using the incremental cost-allocation method. Assume Ideal AA to be the primary party.

(3 marks)

Stationery Selling price Word Processing (WP) RM125 Spreadsheet (SS) RM150 Accounting Software (AS) RM225 WP & SS RM220 WP & AS RM280 All three (WP & SS & AS) RM380