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

Short answer

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

Step-by-step solution

Definition 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.

Calculation 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