Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $1,500 and received 8,500 pieces of candy that are allocated among three groups. Group 1 consists of 2,500 pieces that are expected to sell for $0.15 each. Group 2 consists of 5,500 pieces that are expected to sell for $0.36 each. Group 3 consists of 500 pieces that are expected to sell for $0.72 each. Using the relative sales value method, what is the cost per item in Group 1?
A) $0.13.
B) $0.08.
C) $0.10.
D) $0.19.

Question

Quizplus · Accepted Answer

The relative sales value method allocates costs based on the proportion of total sales value. Group 1's sales value is 2,500 pieces * $0.15 = $375. Total sales value is (2,500 * $0.15) + (5,500 * $0.36) + (500 * $0.72) = $375 + $1,980 + $360 = $2,715. The cost allocated to Group 1 is ($375 / $2,715) * $1,500 = $207.14. The cost per item in Group 1 is $207.14 / 2,500 = $0.08.

Confectioners, a Chain of Candy Stores, Purchases Its Candy in Bulk