The correct answer is: C. incremental revenue allocation method.
The incremental revenue allocation method is a method of revenue allocation that ranks products included in a bundle according to predetermined criteria of management. This method is often used when products are bundled together and sold as a single unit. The criteria used to rank products can vary depending on the specific situation, but they may include factors such as the product’s contribution margin, its sales volume, or its market share.
The incremental revenue allocation method is a relatively simple and straightforward method of revenue allocation. However, it can be difficult to determine the appropriate criteria to use for ranking products. Additionally, this method can be time-consuming and labor-intensive, especially if there are a large number of products to be ranked.
The other options are incorrect for the following reasons:
- Option A, step down allocation method, is a method of revenue allocation in which the revenue from a bundle is allocated to the products in the bundle based on their relative contribution margins.
- Option B, stand-alone revenue allocation method, is a method of revenue allocation in which the revenue from a bundle is allocated to the products in the bundle based on their individual sales volumes.
- Option D, revenue mix allocation method, is a method of revenue allocation in which the revenue from a bundle is allocated to the products in the bundle based on their individual market shares.