Bell, Inc. buys 1,400 computer game CDs from a distributor who is discontinuing

Question

Bell, Inc. buys 1,400 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $13,800. Bell will group the CDs into three price categories for resale, as indicated below

Group

No. of CDs

Price per CD

Determine the cost per CD for each group, using the relative sales value method. (Do not round ratios for computational purposes and round final answers to 2 decimal places, e.g. 5.85.)

Group

Cost per CD

Group

No. of CDs

Price per CD

1 200 $6 2 1,000 12 3 200 17

Explanation / Answer

Sales Value = No.of units*Sale price

Cost allocated

Total Cost * Sales value of Concerned grp / Total Sales Value

Cost per CD

Cost allocated/No. of CDs

Particulars Group 1 Group 2 Group 3 Total Sales Value 1200 12000 3400 16600

Cost allocated

Total Cost * Sales value of Concerned grp / Total Sales Value

997.59 9975.90 2826.51 13800 No. of CDs 200 1000 200 1400

Cost per CD

Cost allocated/No. of CDs

4.98 9.98 14.13 or $5 or $10 or $14

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