Answer:
Windsor Company and Remmers Company
a) Inventory value of unsold units in consignee's hands:
Product cost = $480 per freezer
Freight cost = $9.44 per freezer
Total cost = $489.44 per freezer
Inventory = 45 freezers (90 - 45)
Inventory value = $489.44 x 45 = $22,024.80
b) Profit for the consignor for the sold units:
Sales = $35,100 (45 x $780)
Less Product cost - $22,024.80 (45 x $489.44)
Less Sales Commission = $2,106 (6% of $35,100)
Less Advertising = $210
Less Installation = $330
Profit = $10,429.20
c) Amount of cash to be remitted by the consignee:
Sales Proceeds = $35,100
Less Sales Commission = $2,106 (6% of $35,100)
Less Advertising = $210
Less Installation = $330
Amount to be remitted = $32,454
Explanation:
In consignment relationships, the goods under consignment belong to the the consignor until they are sold to a third party. While the consignee has physical possession, the ownership of the consigned goods belong to the consignor.
The closing inventory value must be included in the consignor's inventory and not in the consignee's.
The profit for the consignor represents the sales value less associated costs. The advertising cost is regarded as a period costs, hence, it was not apportioned between cost of sales and inventory.
Before the consignee can remit cash for items sold, she deducts her commission, including incidental costs incurred.
