Question

On May 3, 2020, Culver Company consigned 60 freezers, costing $470 each, to Remmers Company. The cost of shipping the freezers amounted to $780 and was paid by Culver Company. On December 30, 2020, a report was received from the consignee, indicating that 30 freezers had been sold for $800 each. Remittance was made by the consignee for the amount due after deducting a commission of 6%, advertising of $200, and total installation costs of $350 on the freezers sold.
a. Compute the inventory value of the units unsold in the hands of the consignee.
b. Compute the profit for the consignor for the units sold.
c. Compute the amount of cash that will be remitted by the consignee.

Answer 1

Answer:

a) Valuation of Ending Inventory

The total cost of consignment = $28980

Cost of Freezers= 60 freezers *$470= $28200

Shipment Costs $ 780

Per unit Cost of Consignment= $28980 / 60= $ 483

The inventory value of the units unsold in the hands of the consignee

= (60 units - 30 units )* 483= $ 14490

b) Profit for the Consignor

Sales 30 units at $800                                      $24000

CGS 30 units at 483                                         14490

Gross Profit                                                         9510

Less

Advertising $200

Total installation costs $350

Commision 6% of 24000= $ 1440                     1990

Net Profit                                                           $7520

c) Remittance was made of $7520