Question 6BE

Question

Bell, Inc. buys 1,000 computer game CDs from a distributor who is discontinuing those games. The purchase price for the lot is $8,000. Bell will group the CDs into three price categories for resale, as indicated below. Group No. of CDs Price per CD 1 100 $ 5 2 800 10 3 100 15 Determine the cost per CD for each group, using the relative sales value method

Step-by-Step Solution

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Answer

The cost per CD for Group 1 equals $4, Group 2 equals $8, and Group 3 equals $12.

1Definition of relative sales value method

Under the relative sales value method, the cost of the inventories purchased in lump-sum purchases is allocated based on relative sales value.

2Calculation of cost per CD in each lot

The cost per CD is calculated as follows:

Group	Number of CDs	Sales Price Per CD	Total Sales Price	Relative Sales Price	Total Cost	Cost Allocated to Group	Cost Per Lot
1	100	$5	$500	5/100	$8,000	$400	$4
2	800	10	$8,000	80/100	8,000	6,400	8
3	100	15	$1,500	15/100	8,000	1,200	12
Total			$10,000			$8,000

Question 5BE

Question 7BE

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