Question

Essence 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. Essence is now considering the sale of a bundled product called Sync consisting of one bottle of Him, a men’s cologne, and one bottle of Her, a women’s perfume. For the most recent year, Essence reported the following:


1. Allocate revenue from the sale of each unit of Sync to Him and Her using the following:
a. The stand-alone revenue-allocation method based on selling price of each product
b. The incremental revenue-allocation method, with Him ranked as the primary product
c. The incremental revenue-allocation method, with Her ranked as the primary product
d. The Shapley value method, assuming equal unit sales of Him and Her
2. Of the four methods in requirement 1, which one would you recommend for allocating Sync’s revenues to Him and Her?Explain.


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  • CreatedMay 14, 2014
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