Fatima dispatched 800 cartons of cosmetics costing \text{₦}10,000 per carton to Ngozi on c… — JAMB UTME

Fatima dispatched $800$ cartons of cosmetics costing $\text{₦}10,000$ per carton to Ngozi on consignment. Fatima paid freight and insurance of $\text{₦}400,000$ . Ngozi incurred carriage inwards of $\text{₦}160,000$ , godown rent of $\text{₦}100,000$ , and selling expenses of $\text{₦}200,000$ . At the end of the period, Ngozi reported that $200$ cartons remained unsold. What is the value of the unsold consignment stock?

A
$\text{��}2,000,000$
B
$\text{₦}2,100,000$
$\text{₦}2,140,000$ Answer
D
$\text{₦}2,215,000$

Answer

The value of the unsold consignment stock is

\text{₦}2,140,000

Unsold consignment stock is valued at cost plus a proportionate share of all direct non-recurring expenses incurred by both the consignor and consignee up to the point of bringing the goods to the consignee's premises. The cost of

200

unsold cartons is

\text{₦}2,000,000

. Adding

25\%

of consignor expenses (

\text{₦}100,000

) and

25\%

of consignee carriage inwards (

\text{₦}40,000

) yields

\text{₦}2,140,000

. Recurring expenses like rent and selling costs are excluded.

Step-by-Step Solution

Calculate the proportion of unsold stock

Unsold fraction =

\frac{200}{800} = \frac{1}{4}

25\%

Stock valuation is based on the proportion of total goods remaining unsold.

Calculate the cost price of unsold stock

200 \text{ cartons} \times \text{��}10,000 = \text{₦}2,000,000

Determines the basic cost element of unsold inventory.

Calculate proportionate direct non-recurring expenses

Consignor's freight & insurance =

\frac{1}{4} \times \text{₦}400,000 = \text{₦}100,000

; Consignee's carriage inwards =

\frac{1}{4} \times \text{₦}160,000 = \text{₦}40,000

Only non-recurring direct expenses incurred to bring goods to their present location/condition are added to stock valuation. Godown rent and selling expenses are recurring and excluded.

Sum cost price and proportionate direct expenses

Total valuation =

\text{₦}2,000,000 + \text{₦}100,000 + \text{₦}40,000 = \text{₦}2,140,000

Combines cost price and allowable proportionate expenses.

Key Concept

Valuation of Unsold Consignment Stock

Estimated Time:1m 30s

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