Question

On May 3, 2014, Eisler Company consigned 80 freezers, costing $500 each, to Remmers Company. The cost of shipping the freezers amounted to $840 and was paid by Eisler Company. On December 30, 2014, a report was received from the consignee, indicating that 40 freezers had been sold for $750 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 $320 on the freezers sold. Questions 1.(a) Compute the inventory value of the units unsold in the hands of the consignee. 2.(b) Compute the profit for the consignor for the units sold. 3. (c) Compute the amount of cash that will be remitted by the consignee.

Answer 1

Answer:

a. 20,420

b. 7,260

c. 27,680

Explanation:

a. The computation of the unsold units is shown below:

Cost of freezers (500 × 40)            20,000

Cost of shipping (840 ÷ 80 × 40)    420

So, the total unsold units               20,420

b. The computation of the profit for the consignor for the units sold is shown below:

Sales (750 × 40)                                        30,000

Less: unsold units                                     (20,420)

Less: Commission (30,000 × 6%)             (1,800)

Less: Advertising expense                        ($200)

Less: Installation cost                                ($320)

Profit                                                            $7,260

c. The amount of cash is shown below:

Sales (750 × 40)                                        30,000

Less: Commission (30,000 × 6%)             (1,800)

Less: Advertising expense                        ($200)

Less: Installation cost                                ($320)

Cash                                                           $27,680