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Consignment Sales: Problems & Solutions

This document contains several consignment sales problems and solutions. Problem 9-1 contains true/false questions, Problem 9-2 contains computational theory questions about calculating costs, commissions, and inventory for a consignment arrangement. Problem 9-3 similarly asks the reader to calculate revenues, costs, commissions and inventory for a publishing consignment. Problem 9-4 provides a scenario and asks the reader to calculate sales, costs, commissions and profits. Problem 9-5 contains multiple choice theory questions.

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Venz Lacre
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341 views4 pages

Consignment Sales: Problems & Solutions

This document contains several consignment sales problems and solutions. Problem 9-1 contains true/false questions, Problem 9-2 contains computational theory questions about calculating costs, commissions, and inventory for a consignment arrangement. Problem 9-3 similarly asks the reader to calculate revenues, costs, commissions and inventory for a publishing consignment. Problem 9-4 provides a scenario and asks the reader to calculate sales, costs, commissions and profits. Problem 9-5 contains multiple choice theory questions.

Uploaded by

Venz Lacre
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 9

Consignment Sales

PROBLEM 9-1: TRUE OR FALSE


1. TRUE
2. TRUE
3. FALSE
4. FALSE
5. FALSE
6. TRUE
7. FALSE
8. FALSE
9. TRUE
10. FALSE

PROBLEM 9-2: THEORY & COMPUTATIONAL


1. A
2. D
3. B
4. A
5. Solutions:

Requirement (a):

The commission expense is computed as follows:

Net remittance 232,000


Freight out 16,000
Installation costs 8,000
Total 256,000
Divide by: 80%
Gross selling price of goods sold 320,000
Multiply by: 20%
Commission expense 64,000

Cost of goods sold is computed as follows:

Unit cost 10,000


Freight cost per unit (3,000 ÷ 20) 150
Total unit cost 10,150
Multiply by: Number of water heaters sold 16
Cost of goods sold 162,400

1
Profit is computed as follows:

Gross selling price of goods sold 320,000


Cost of goods sold (162,400)
Gross profit 157,600
Freight out (16,000)
Installation costs (8,000)
Commission expense (64,000)
Profit 69,600

Requirement (b):

Unit cost 10,000


Freight cost per unit (3,000 ÷ 20) 150
Total unit cost 10,150
Multiply by: Unsold units (20 - 16) 4
Ending inventory 40,600

PROBLEM 9-3: EXERCISE

Solutions:

Requirement (a):

The publisher’s suggested retail price is computed as follows:

Let X = Book sales at the publisher’s suggested retail price

2%X + 20%X = 69,300


20%X = 69,300
X = 69,300 / 22%
X = 315,000

315,000 ÷ 700 books sold = 450 publisher’s suggested retail price per book

The publisher’s profit is computed as follows:

Revenue (450 x 700) 315,000


Cost of goods sold (a) (225,400)
Gross profit 89,600
Tax expense (2% x 315,000) (6,300)
Commission expense (20% x 315,000) (63,000)
Profit 20,300

2
(a) The
cost of goods sold is computed as follows:
No. of books sold 700
Unit cost 300
Total 210,000
Freight (22 x 700) 15,400
Cost of goods sold 225,400

Requirement (b):

Commission based on publisher's suggested retail price


(315,000 x 20%) 63,000
Mark up on publisher's suggested retail price
(315,000 x 15%) 47,250
Commission income 110,250

Requirement (c):

No. of unsold books 300


Unit cost before freight 300
Total 90,000
Freight (22 x 300) 6,600
Ending inventory 96,600

PROBLEM 9-4: CLASSROOM ACTIVITY


Solution:

Requirement (a):

Total sales [2,100,000 x (8-3)] 10,500,000


Cost of goods sold (a) (5,125,000)
Gross profit 5,375,000
Commission (b) (1,750,000)
Finder's fee (5% x 1,750,000) (87,500)
Delivery, installation and testing (50,000 x 5) - 5,000 scrap (245,000)
Profit 3,292,500

(a)
Cost of goods sold is computed as follows:
Unit cost 1,000,000
Freight per machine (200,000 ÷ 8) 25,000
Total unit cost 1,025,000
Multiply by: No. of machines sold 5
Cost of goods sold 5,125,000

3
(b)
The commission is computed as follows:
We will use the following formula for bonus after bonus:

B = P – [P ÷ (1 + Br)]

Commission = Gross sales – [Gross sales ÷ (1 + Commission rate)]


Commission = 10,500,000 – [10,500,000 ÷ (1 + 20%)]
Commission = 10,500,000 – 8,750,000
Commission = 1,750,000

Requirement (b):
Total sales [2,100,000 x (8-3)] 10,500,000
Commission (1,750,000)
Finder's fee (87,500)
Delivery, installation and testing (50,000 x 5) - 5,000 scrap (245,000)
Net remittance 8,417,500

Requirement (c):
Unit cost before freight 1,000,000
Freight per machine (200,000 ÷ 8) 25,000
Total unit cost 1,025,000
Multiply by: No. of unsold machines 3
Ending inventory 3,075,000

PROBLEM 9-5: MULTIPLE CHOICE - THEORY


1. B 6. D
2. B 7. C
3. C
4. D
5. B

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