Question
Best Solutions Inc., sells computer hardware to end consumers. The CX30 is sold as a bundle, which includes three hardware products: a personal computer (PC)
Best Solutions Inc., sells computer hardware to end consumers. The CX30 is sold as a "bundle", which includes three hardware products: a personal computer (PC) tower, a 26-inch monitor, and a color laser printer. Each of these products is made in a separate manufacturing division of Best Solutions and can be purchased individually as well as in a bundle. Best Solutions sells roughly equal quantities of the three products. The individual selling prices and per unit costs are as follows:
Computer Component | Individual Selling Price Per Unit | Cost Per Unit |
PC Tower | $784 | $322 |
Monitor | $256 | $182 |
Color Laser Print | $560 | $196 |
Computer bundle purchase price | 900 |
|
1. | Allocate the revenue from the computer bundle purchase to each of the hardware products using the stand-alone method based on the individual selling price per unit. |
2. | Allocate the revenue from the computer bundle purchase to each of the hardware products using the stand-alone method based on cost per unit. |
3. | Allocate the revenue from the computer bundle purchase to each of the hardware products using the stand-alone method based on physical units (that is, the number of individual units of product sold per bundle). |
4. | Which basis of allocation makes the most sense in this situation? Explain your answer. |
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