18. On May 3, 2014, Eisler Company consigned 88 freezers, costing $490 each, to

Question

18. On May 3, 2014, Eisler Company consigned 88 freezers, costing $490 each, to Remmers Company. The cost of shipping the freezers amounted to $890 and was paid by Eisler Company. On December 30, 2014, a report was received from the consignee, indicating that 44 freezers had been sold for $710 each. Remittance was made by the consignee for the amount due, after deducting a commission of 6%, advertising of $240, and total installation costs of $310 on the freezers sold.

a. Compute the inventory value of units unsold in the hands of the consignee.
Inventory value $_________
b. Compute the profit for the consignor for the units sold.
Profit on consignment sales $__________
c. Compute the amount of cash that will be remittes by the consignee
Remittance from consignee $__________

Explanation / Answer

No of Freezers Consigned = 88

Cost of Frezzers = 88*$490 = $43120

Cost of shipping the freezers = $890

Total cost of the Freezers = Actual cost + Shipping cost = $43120+$890 = $44010

Cost of each Freezer = $44010/88 = $500

a. Inventory value of unsold units in the hands of Inventory = 44*$500 = $22000

Total sales of the Freezers = 44*$710 = $31240

b. Profit for the Consignor for the units sold :-

Sale Value = $31240

Cost of the goods=$44*$500 = $22000

Comission to the Consignee= $31240*6% = $1875

Total cost of Installation = $310

Profit = $31240-$22000-$1875-$310 = $7055

c. Amount of cash will be remitted by the consignee to the consignor :-

Pofit+cost of goods sold = $7055+$22000 = $29055

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