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:

Requirement (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

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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 Profit

320,000 (162,400) 157,600 (16,000) (8,000) (64,000) 69,600

Requirement (b): 10,000 150 10,150 4 40,600

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

PROBLEM 9-3: EXERCISE Solutions: Requirement (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

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315,000 (225,400) 89,600 (6,300) (63,000) 20,300

(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

Requirement (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%) Commission income

63,000 47,250 110,250

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

300 300 90,000 6,600 96,600

PROBLEM 9-4: CLASSROOM ACTIVITY Solution: Requirement (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

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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

Requirement (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

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

1,000,000 25,000 1,025,000 3 3,075,000

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

B

3.

C

4.

D

5.

B

7.

10,500,000 (1,750,000) (87,500) (245,000) 8,417,500

C

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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 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: 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) Profit (a)

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

38,500 (3,500) (350)

Delivery and installation (30 x 5) Net remittance to consignor

(150) 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)

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Net profit

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% Sale price

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 profit

82,600 1,200 1,400 2,800 88,000 12,000 100,000

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% Sale 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 profit

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

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

64,980 850 2,000 67,830 11,970 79,800

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

79,800 (52,780) 27,020 (11,970) (850) (2,000) 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)] Cost of goods sold

79,800 (60,000) 19,800 330 60 200 260 203 52,780

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

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)

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40 203 8,120

142,020 180 180 142,380 80

Total books sold

1,780

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