Answered: 2: Requirements 1. Allocate the revenue…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter21: Variable Costing For Management analysis

Section: Chapter Questions

Problem 12E: Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the...

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Business Systems, 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

Business Systems and can be purchased individually as well as in a bundle.

Business Systems sells roughly equal quantities of the three products. The individual selling prices and per unit costs are as follows:

Read the requirements2.

Requirement 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. (Enter the allocation proportion as a decimal rounded to five decimal places. Round the revenue allocated to the nearest whole dollar.)

Computer component	Allocation Proportion	Revenue Allocated
PC tower
Monitor
Color laser printer

Requirement 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. (Enter the allocation proportion as a decimal rounded to five decimal places. Round the revenue allocated to the nearest whole dollar.)

Computer component	Allocation Proportion	Revenue Allocated
PC tower
Monitor
Color laser printer

Requirement 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). (Round the revenue allocated to the nearest whole dollar.)

Computer component	Allocation Proportion	Revenue Allocated
PC tower	(1)
Monitor	(2)
Color laser printer	(3)

Requirement 4. Which basis of allocation makes the most sense in this situation? Explain your answer.

Sharing on the basis of (4) makes the most sense. Using this method each division takes (5)

1: Data Table

Computer Component	Individual Selling Price Per Unit	Cost Per Unit
PC Tower	$780	$246
Monitor	$285	$138
Color laser printer	$435	$216
Computer bundle purchase price	$1,200

2: Requirements

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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