Chapter 7.

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Consignment Sales

PROBLEM 7.1-1: THEORY

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

PROBLEM 7.1-2: COMPUTATIONAL

1. A (20 x 1,600) = 32,000

2. C (505 5) x 100 x 90% = 45,000

3. D (8,500 85%) = 10,000

4. B (5,000 + 7,000 + 50,000) = 62,000

5. D (18,000 + 900) = 18,900

6. D (40,000 x 40%) + 27,000 = 43,000

7. C
Solution:
Sales revenue (7,700 x 5) 38,500
Cost of goods sold (6,000 x 5) + (720 x 5/12) (30,300)
Gross profit 8,200
Commission based on sales net of commission (a) (3,500)
Marketing expense based on commission (3,500 x 10%) (350)
Delivery and installation (30 x 5) (150)
Profit 4,200

(a) We will use a formula similar to the formula of bonus after bonus:
38,500
Commission based on sales after commission = 38,500 -
1+10%
Commission based on sales after commission = 3,500

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8. A
Solution:
Sales 38,500
Commission based on sales net of commission (3,500)
Marketing expense based on commission (3,500 x 10%) (350)
Delivery and installation (30 x 5) (150)
Net remittance to consignor 34,500

9. C
Solution:
Gross profit from sale 9,000
Commission (adjusted) (5% x 72K) (3,600)
Selling expenses (800)
Installation and delivery (1,200)
Freight (2K x 6/10) (1,200)
Net profit 2,200

10. A
Solution:
Net remittance 82,600
Selling expenses 1,200
Cost of antennae given free 1,400
Delivery and installation 2,800
Net remittance before other costs but after commission 88,000
Commission (88K / 88%) x 12% 12,000
Sale price 100,000

11. C
Solution:
Sales 100,000
Cost of goods sold (9K x 8) + (600 x 8/12) (72,400)
Gross profit 27,600
Commission expense (12,000)
Selling expenses (1,200)
Cost of antennae given free (1,400)
Delivery and installation (2,800)
Net profit 10,200

12. B
Solution:
Net remittance 5,580
Selling expenses 360
Delivery and installation 180
Net remittance before other costs but after commission 6,120

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Commission (6,120 / 85%) x 15% 6,120
Sale price 12,240

Sales 12,240
Cost of goods sold (120 x 36) + (600 x 36/60) (4,680)
Gross profit 7,560
Commission expense (see computation above) (6,120)
Selling expenses (360)
Delivery and installation (180)
Net profit 900

13. B (5 dozens x 12) = 60 36 sold = 24 unsold x [120 + (600/60)] = 3,120

14. A
Solution:
Net remittance 64,980
Delivery expense 850
Repair costs 2,000
Net remittance before other costs but after commission 67,830
Commission (67,830 / 85%) x 15% 11,970
Sale price 79,800

Sales 79,800
Cost of goods sold (see computation below) (52,780)
Gross profit 27,020
Commission expense (see computation above) (11,970)
Delivery expense (850)
Repair costs (2,000)
Net profit 12,200

Total sales 79,800

Less: Sale of first 200 units [200 x (200 x 150%)] (60,000)
Sales of units with increased sale price 19,800
Divide by: Increased selling price 330
Units sold at increased sale price 60
Add back: first 200 units sold 200
Total units sold 260
Multiply by: Unit cost [200 + (900/300)] 203
Cost of goods sold 52,780

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15. A
Solution:
Unsold inventory (300 - 260) 40
Multiply by: Unit cost [200 + (900/300)] 203
Cost of unsold goods 8,120

16. B
Solution:
Net remittance 142,020
Delivery expense 180
Advertising expense 180
Net remittance before other costs but after commission 142,380
Divide by: Sale price per book net of commission (100 - 20) 80
Total books sold 1,780