Question

Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $2700 and received 7500 pieces of candy that are allocated among three groups. Group 1 consists of 2230 pieces that are expected to sell for $0.15 each. Group 2 consists of 4960 pieces that are expected to sell for $0.31 each. Group 3 consists of 310 pieces that are expected to sell for $0.67 each. Using the relative sales value method, what is the cost per item in Group 1

Answer 1

group units selling price total

1 2,230 $0.15 $334.50

2 4,960 $0.31 $1,537.60

3 310 $0.67 $207.70

total $2,079.80

Something is not right with the question, since the company paid too much money for the candy that they purchased. In order to allocate costs, we divide the cost by the selling price = $2,700 / $2,079.80 = $1.2982

the unit cost for each candy is:

Group sales price per unit adjusting cost factor cost per unit

1 $0.15 $1.2982 $0.195

2 $0.31 $1.2982 $0.402

3 $0.67 $1.2982 $0.87