Question

Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $3100 and received 7100 pieces of candy that are allocated among three groups. Group 1 consists of 2110 pieces that are expected to sell for $0.15 each. Group 2 consists of 4720 pieces that are expected to sell for $0.35 each. Group 3 consists of 270 pieces that are expected to sell for $0.71 each. Using the relative sales value method, what is the cost per item in Group 1?

Answer 1

$0.215

Step-by-step explanation:

The computation of the cost per item in Group 1 is shown below:-

Candy amount paid = $3,100

Item received = 7,100

For Group 1

Sale value = Group 1 units × Selling price

= 2,110 × $0.15

= $316.5

For Group 2

Sale value = Group 2 units × Selling price

= 4,720 × $0.35

= $1,652

For Group 3

Sale value = Group 3 units × Selling price

= 270 × $0.71

= $191.7

= Total sale value = $316.5 + $1,652 + $191.7

= $2,160.2

So, Sale percentage for Group 1 = $316.5 ÷ $2,160.2

= 14.65%

Now, the proportion of cost for Group 1

= $3,100 × 14.65%

= 454.15

Cost per unit = Proportion cost ÷ Group 1 units

= $454.15 ÷ 2,110

= $0.215