Zainab Traders dispatched 1,200 crates of industrial lubricants costing \text{₦}8,000 per … — JAMB UTME

Zainab Traders dispatched $1,200$ crates of industrial lubricants costing $\text{₦}8,000$ per crate on consignment to Aliyu & Sons. Zainab Traders paid $\text{₦}480,000$ for freight and $\text{₦}120,000$ for transit insurance. Aliyu & Sons paid $\text{₦}240,000$ for clearing charges, $\text{₦}180,000$ for godown rent, and $\text{₦}300,000$ for sales commission. If $900$ crates were sold by the end of the accounting period, what is the total value of the unsold consignment stock in Naira ( $\text{₦}$ )?

Answer: 2610000 ₦

Answer

The total value of the unsold consignment stock is ₦2,610,000.

The correct total value of unsold consignment stock is ₦2,610,000. This comprises the basic cost of 300 unsold crates (₦2,400,000), proportionate consignor non-recurring expenses of freight and insurance (₦150,000), and proportionate consignee non-recurring clearing charges (₦60,000). Recurring expenses (godown rent and commission) are omitted.

Step-by-Step Solution

Determine the number of unsold crates and compute their basic cost price.

Unsold quantity = 300 crates; Basic cost = ₦2,400,000

Unsold stock is measured as the difference between total consigned quantity (1,200 crates) and sold quantity (900 crates), multiplied by the unit cost (₦8,000).

Add the proportionate share of consignor's direct (non-recurring) expenses.

Proportionate consignor expenses = ₦150,000

Freight (₦480,000) and transit insurance (₦120,000) are incurred to bring goods to their destination and must be apportioned to unsold units (1/4 × ₦600,000 = ₦150,000).

Add the proportionate share of consignee's direct (non-recurring) expenses while excluding recurring expenses.

Proportionate consignee direct expenses = ₦60,000

Clearing charges (₦240,000) are direct non-recurring costs (1/4 × ₦240,000 = ₦60,000). Recurring expenses such as godown rent and sales commission are excluded from stock valuation.

Sum basic cost, consignor proportionate expenses, and consignee direct proportionate expenses.

Total unsold stock valuation = ₦2,610,000

Consignment stock is valued at cost plus all proportionate non-recurring expenses incurred up to the point of reaching the consignee's warehouse.

Key Concept

Valuation and Accounting Treatment of Unsold Consignment Stock

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