Chapter 9 Teachers Manual Afar Part 1

Chapter 9 Consignment Sales PROBLEM 9-1: TRUE OR FALSE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

TRUE TRUE FALSE FALSE FALSE TRUE FALSE FALSE TRUE FALSE

PROBLEM 9-2: THEORY & COMPUTATIONAL 1. A 2. 3. 4. 5.

D B A Solutions:

R eq equir uirem emen entt (a): (a): The commission expense is computed as follows: Net remittance Freight out Installation costs Total Divide by: Gross selling price of goods sold Multiply by: Commission expense

232,000 16,000 8,000 256,000 80% 320,000 20% 64,000

Cost of goods sold is computed as follows: Unit cost Freight cost per unit (3,000 ÷ 20) Total unit cost Multiply by: Number of water heaters sold Cost of goods sold

1

10,000 150 10,150 16 162,400

Profit is computed as follows: Gross selling price of goods sold Cost of goods sold Gross profit Freight out Installation costs Commission expense

320,000 (162,400) 157,600 (16,000) (8,000) (64,000)

Profit

69,600

R equirement (b): Unit cost Freight cost per unit (3,000 ÷ 20) Total unit cost Multiply by: Unsold units (20 - 16)

10,000 150 10,150 4

E nding inventory

40,600

PROBLEM 9-3: EXERCISE Solutions:

R equirement (a): The publisher’s suggested retail price is computed as follows: Let X = Book sales at the publisher’s suggested retail price 2%X + 20%X = 69,300 20%X = 69,300 X = 69,300 / 22% X = 315,000 315,000 ÷ 700 books sold = 450 publisher’s suggested retail price per book 

The publisher’s profit is computed as follows: Revenue (450 x 700) Cost of goods sold (a) Gross profit Tax expense (2% x 315,000) Commission expense (20% x 315,000)

Profit

315,000 (225,400) 89,600 (6,300) (63,000)

20,300 2

(a)

The cost of goods sold is computed as follows: No. of books sold 700 Unit cost 300 210,000 Total Freight (22 x 700) 15,400 Cost of goods sold 225,400

R equirement (b): Commission based on publisher's suggested retail price (315,000 x 20%) Mark up on publisher's suggested retail price (315,000 x 15%)

C ommis s ion income

63,000 47,250

110,250

Requirement (c): No. of unsold books Unit cost before freight Total Freight (22 x 300)

300 300 90,000 6,600

E nding inventory

96,600

PROBLEM 9-4: CLASSROOM ACTIVITY Solution:

R equirement (a): Total sales [2,100,000 x (8-3)] Cost of goods sold (a) Gross profit Commission (b) Finder's fee (5% x 1,750,000) Delivery, installation and testing (50,000 x 5) - 5,000 scrap

Profit

10,500,000 (5,125,000) 5,375,000 (1,750,000) (87,500) (245,000)

3,292,500

(a)  Cost

of goods sold is computed as follows: Unit cost Freight per machine (200,000 ÷ 8) Total unit cost Multiply by: No. of machines sold Cost of goods sold

3

1,000,000 25,000 1,025,000 5 5,125,000

(b)  The

commission is computed as follows: We will use the following formula for bonus after bonus : B = P  – [P ÷ (1 + Br)] Commission = Gross sales – [Gross sales ÷ (1 + Commission rate)] Commission = 10,500,000 – [10,500,000 ÷ (1 + 20%)] Commission = 10,500,000 – 8,750,000 Commission = 1,750,000

R equirement (b): Total sales [2,100,000 x (8-3)] Commission Finder's fee Delivery, installation and testing (50,000 x 5) - 5,000 scrap

Net remittance

10,500,000 (1,750,000) (87,500) (245,000)

8,417,500

Requirement (c): Unit cost before freight Freight per machine (200,000 ÷ 8) Total unit cost Multiply by: No. of unsold machines

1,000,000 25,000 1,025,000 3

E nding inventory

3,075,000

PROBLEM 9-5: MULTIPLE CHOICE - THEORY 1. B 6. D 2.

B

3.

C

4.

D

5.

B

7.

C

4

PROBLEM 9-6: MULTIPLE CHOICE (COMPUTATIONAL) 1. A (See solution in the second requirement) 2. B Solution The total unit cost is computed as follows: Cost of consigned goods (1M x 8) Freight Total goods available for sale (in pesos) Divide by: TGAS (in units) Total unit cost

8,000,000 200,000 8,200,000 8 1,025,000

The number of unsold units is computed as follows: Ending inventory Divide by: Total unit cost Unsold units

3,075,000 1,025,000 3

The number of units sold is computed as follows: TGAS (in units) Unsold units No. of units sold

8 (3) 5

Profit is computed as follows: Total sales (2,100,000 x 5) Cost of goods sold (a) Gross profit Commission (b) Finder's fee Delivery, installation and testing (50,000 x 5) - 5,000 scrap

10,500,000 (5,125,000) 5,375,000 (1,750,000) (87,500) (245,000)

Profit

3,292,500

(a)  Cost

of goods sold is computed as follows: Total unit cost No. of units sold Cost of goods sold

(b)  The

commission is computed as follows: We will use the following formula for bonus after bonus : B = P  – [P ÷ (1 + Br)] Commission = Gross sales – [Gross sales ÷ (1 + Commission rate)] Commission = 10,500,000 – [10,500,000 ÷ (1 + 20%)]

5

1,025,000 5 5,125,000

Commission = 10,500,000 – 8,750,000 Commission = 1,750,000 3.

A (20 x 1,600) = 32,000

4.

C (505 – 5) x ₱100 x 90% = 45,000

5.

D (8,500 ÷ 85%) = 10,000

6.

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

7.

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

8.

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

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

38,500 (30,300) 8,200 (3,500) (350) (150)

Profit (a)

4,200

 We will use a formula similar to the formula of bonus after bonus :

Commission based on sales after commission

=

38,500

-

38,500 1+10%

Commission based on sales after commission = 3,500 

10. A Solution: Sales Commission based on sales net of commission Marketing expense based on commission (3,500 x 10%) Delivery and installation (30 x 5)

38,500 (3,500) (350) (150)

Net remittance to cons ig nor

34,500

11. C Solution: Gross profit from sale Commission (adjusted) (5% x 72K) Selling expenses Installation and delivery Freight (2K x 6/10)

9,000 (3,600) (800) (1,200) (1,200)

6

Net profi t

2,200

12. A Solution: Net remittance Selling expenses Cost of antennae given free Delivery and installation Net remittance before other costs but after commission Commission (88K / 88%) x 12%

82,600 1,200 1,400 2,800 88,000 12,000

 S ale price

100,000

13. C Solution: Sales Cost of goods sold (9K x 8) + (600 x 8/12) Gross profit Commission expense Selling expenses Cost of antennae given free Delivery and installation

Net profi t

100,000 (72,400) 27,600 (12,000) (1,200) (1,400) (2,800)

10,200

14. B Solution: Net remittance Selling expenses Delivery and installation Net remittance before other costs but after commission Commission (6,120 / 85%) x 15%

 S ale price

5,580 360 180 6,120 6,120 12,240

Sales Cost of goods sold (120 x 36) + (600 x 36/60) Gross profit Commission expense (see computation above) Selling expenses Delivery and installation

Net profi t

12,240 (4,680) 7,560 (6,120) (360) (180)

900

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

7

16. A Solution: Net remittance Delivery expense Repair costs Net remittance before other costs but after commission Commission (67,830 / 85%) x 15%

64,980 850 2,000 67,830 11,970

 S ale price

79,800

Sales Cost of goods sold (see computation below) Gross profit Commission expense (see computation above) Delivery expense Repair costs

79,800 (52,780) 27,020 (11,970) (850) (2,000)

Net profi t

12,200

Total sales Less: Sale of first 200 units [200 x (200 x 150%)] Sales of units with increased sale price Divide by: Increased selling price Units sold at increased sale price  Add back: first 200 units sold Total units sold Multiply by: Unit cost [200 + (900/300)]

79,800 (60,000) 19,800 330 60 200 260 203

C os t of goods s old

52,780

17. A Solution: Unsold inventory (300 - 260) Multiply by: Unit cost [200 + (900/300)]

C os t of uns old g oods

40 203

8,120

18. B Solution: Net remittance Delivery expense  Advertising expense Net remittance before other costs but after commission Divide by: Sale price per book net of commission (100 - 20)

8

142,020 180 180 142,380 80

Total books s old

1,780

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