Question

On August 5, 2021, Ivanhoe Furniture shipped 50 dining sets on consignment to Furniture Outlet, Inc. The cost of each dining set was $250 each. The cost of shipping the dining sets amounted to $2600 and was paid for by Ivanhoe Furniture. On December 30, 2021, the consignee reported the sale of 40 dining sets at $750 each. The consignee remitted payment for the amount due after deducting a 5% commission, advertising expense of $500, and installation and setup costs of $680. The total profit on units sold for the consignor is
a. $25620.
b. $27320.
c. $15960.
d. $17320.

Answer 1

Answer:

Total profit for units sold for consignor is 15240 $

Explanation:

Revenue generated from the sale is equal to 40 * 750 $ = 30000$. Since this is consignment sale, revenue belongs to consignor minus the commission and expenses of the consignee. Therefore: 30000-1500-500-680 = 27320$. As the cost of each set was 250 and 40 sets were sold, total amount is 10000 and the cost of shipping 40 sets was 2080, total profit is therefore 15240$. The cost of shipping 40 sets we can get if we divide total cost with the number of sets shipped. Then we get cost per unit and since 40 sets was sold the shipping cost of that sale was 2080$.