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) 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.

Answer 1

1)

Items	standalone price	weight based on standalone price	Allocation of revenue (price*weight)
PC Tower	784	784/1600= .49	900*.49= 441
Monitor	256	256/1600 = .16	900*.16= 144
Color Laser print	560	560/1600 =.35	900*.35= 315
	1600		900

2)

Items	standalone cost	weight based on standalone cost	Allocation of revenue (price*weight)
PC Tower	322	322/700=..46	900*.46=414
Monitor	182	182/700=.26	234
Color Laser print	196	196/700=.28	252
	700		900

3)

Items	Physical quantity	weight based on standalone price	Allocation of revenue (price*weight)
PC Tower	1	1/3=.33333	300
Monitor	1	1/3=.33333	300
Color Laser print	1	1/3=.33334	300
	3		900

4)The Allocation based on Individual selling price per unit makes a most sensible allocation since It reflects the true % of individual selling price of products included in a Bundle or a price of bundle.