FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The Nash Co. knows that students want new backpack and jacket styles before school begins each year. The company is up to the
challenge, as its designers and manufacturers work around the clock to create the trendiest looks in both of these product categories.
The Nash's top-selling backpack normally brings in a whopping $84 in sales to the business, while its up-and-coming windbreaker
jacket sells for a more affordable $56. The company is trying to really push these products, as it earns very high margins on them.
In order to capture the hearts and minds of the back-to-school crowd, The Nash management offers a special: buy both a backpack
and a jacket for just $104! Managers hope this hot deal will be attractive to students, particularly since the company's high-end
backpack sells for $105 all by itself.
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Transcribed Image Text:The Nash Co. knows that students want new backpack and jacket styles before school begins each year. The company is up to the challenge, as its designers and manufacturers work around the clock to create the trendiest looks in both of these product categories. The Nash's top-selling backpack normally brings in a whopping $84 in sales to the business, while its up-and-coming windbreaker jacket sells for a more affordable $56. The company is trying to really push these products, as it earns very high margins on them. In order to capture the hearts and minds of the back-to-school crowd, The Nash management offers a special: buy both a backpack and a jacket for just $104! Managers hope this hot deal will be attractive to students, particularly since the company's high-end backpack sells for $105 all by itself.
Assume that The Nash incurs a cost of $22 to produce the windbreaker jacket. How much gross margin does it normally earn on
each jacket sold? How much gross margin would it report for each bundled jacket sale under the stand-alone method, as in part
(a)? How much gross margin would it report for each bundled jacket sale under the incremental method, as in part (b)? Would the
company consider the cost of each product before deciding on a method to allocate bundled revenue? (Round answers to 2 decimal
places, e.g. 15.25. Enter negative amounts with either a-sign e.g.-15.25 or in parenthesis e.g. (15.25).)
Bundle: Stand-Alone
Gross margin $
Normal Sales
$
Bundle: Incremental
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Transcribed Image Text:Assume that The Nash incurs a cost of $22 to produce the windbreaker jacket. How much gross margin does it normally earn on each jacket sold? How much gross margin would it report for each bundled jacket sale under the stand-alone method, as in part (a)? How much gross margin would it report for each bundled jacket sale under the incremental method, as in part (b)? Would the company consider the cost of each product before deciding on a method to allocate bundled revenue? (Round answers to 2 decimal places, e.g. 15.25. Enter negative amounts with either a-sign e.g.-15.25 or in parenthesis e.g. (15.25).) Bundle: Stand-Alone Gross margin $ Normal Sales $ Bundle: Incremental
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