Apples and Strawberries

Solution

C. Mendoza 1
 What is the product cost of one kilo of
apples?
Key issue: how to allocate € 42 of transportation costs
between the apples and the strawberries?

Solution n° 1 : according to the number of kilos

42 / 100 kgs = 0.42 €/kg

Each kilo of apples «receives» € 0.42 of transportation

cost
Apples: Cost/kg = € 2 + € 0.42 = € 2.42

Strawberries: Cost/kg = € 4 + € 0.42= € 4.42

C. Mendoza 2
 What is the product cost of one kilo of
apples?
Key issue: how to allocate € 42 of transportation costs
between the apples and the strawberries?

Solution n° 2 : according to the purchasing expenses

Apples: 50 x 2 = € 100
Strawberries: 50 x 4 = € 200
Total purchasing expenses = € 300
Transportation costs allocated to the 50 kgs of Apples
= 100/300 x 42 = €14

Each kilo of apples «receives» 14/50 = €0.28 of transportation cost

Apples: Cost/kg = € 2 + € 0.28 = € 2.28
Strawberries: Cost/kg = € 4 + € (28/50)= 4 + 0.56 = € 4.56
C. Mendoza 3
 What is the product cost of one kilo of
apples?
Key issue: how to allocate € 42 of transportation costs
between the apples and the strawberries?

Solution n° 3 : Allocate all the transportation costs to the

Apples and 0 to the strawberries

Each kilo of apples «receives» 42/50 = €0.84 of transportation cost

Apples: Cost/kg = € 2 + € 0.84 = € 2.84

Strawberries: Cost/kg = € 4

C. Mendoza 4
• Allocation base: number of kgs
Apples: € 2 + (21 ÷ 50) = € 2.42
Strawberries: € 4 + (21 ÷ 50) = € 4.42

• Allocation base: purchasing expenses

Apples: € 2 + (14 ÷ 50) = € 2.28
Strawberries: € 4 + (28 ÷ 50) = € 4.56

• 100% for the Apples!

Apples: € 2 + (42 ÷ 50) = € 2.84
Strawberries: € 4

• Other...

A Cost is a Choice
C. Mendoza 5