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Difficulty: HardConsignee's Commission: Ordinary, Del-Credere, and Overriding Commission

Tunde consigned 500 packages of merchandise to Emeka to sell on commission. The commission terms agreed upon in the consignment contract are as follows:
- Ordinary Commission: 5%5\% on total gross sales.
- Del-Credere Commission: 2.5%2.5\% on credit sales.
- Overriding Commission: 10%10\% on any excess selling price realized above the benchmark price of ₦1,800\text{₦}1,800 per package.

During the trading period, Emeka reported the following sales transactions:
- 200200 packages sold for cash at ₦2,000\text{₦}2,000 per package.
- 150150 packages sold on credit at ₦2,200\text{₦}2,200 per package.
- 5050 packages sold for cash at ₦1,800\text{₦}1,800 per package.

What is the total commission earned by Emeka in Naira (₦\text{₦})?

Answer: 59250 ₦

Answer

The total commission earned by Emeka is ₦59,250\text{₦}59,250.
The correct total commission is ₦59,250\text{₦}59,250. Ordinary commission (5%5\% of total sales of ₦820,000\text{₦}820,000) equals ₦41,000\text{₦}41,000. Del-credere commission (2.5%2.5\% of credit sales of ₦330,000\text{₦}330,000) equals ₦8,250\text{₦}8,250. Overriding commission (10%10\% of the ₦100,000\text{₦}100,000 total price excess over ₦1,800\text{₦}1,800 per package) equals ₦10,000\text{₦}10,000. Adding these three amounts yields ₦41,000+₦8,250+₦10,000=₦59,250\text{₦}41,000 + \text{₦}8,250 + \text{₦}10,000 = \text{₦}59,250.

Step-by-Step Solution

1
Calculate the total gross sales and break them down into cash sales and credit sales.
Cash Sales: (200×₦2,000)+(50×₦1,800)=₦400,000+₦90,000=₦490,000(200 \times \text{₦}2,000) + (50 \times \text{₦}1,800) = \text{₦}400,000 + \text{₦}90,000 = \text{₦}490,000.
Credit Sales: 150×₦2,200=₦330,000150 \times \text{₦}2,200 = \text{₦}330,000.
Total Gross Sales: ₦490,000+₦330,000=₦820,000\text{₦}490,000 + \text{₦}330,000 = \text{₦}820,000.
Different types of commission apply to different bases (total sales, credit sales, or excess realized).
2
Compute the Ordinary Commission.
Ordinary Commission = 5%×₦820,000=₦41,0005\% \times \text{₦}820,000 = \text{₦}41,000.
Ordinary commission is calculated on the total gross sales unless specified otherwise.
3
Compute the Del-Credere Commission.
Del-Credere Commission = 2.5%×₦330,000=₦8,2502.5\% \times \text{₦}330,000 = \text{₦}8,250.
The contract explicitly states that del-credere commission is calculated at 2.5%2.5\% on credit sales.
4
Compute the Overriding Commission.
Excess price on 200 cash packages: 200×(₦2,000−₦1,800)=₦40,000200 \times (\text{₦}2,000 - \text{₦}1,800) = \text{₦}40,000.
Excess price on 150 credit packages: 150×(₦2,200−₦1,800)=₦60,000150 \times (\text{₦}2,200 - \text{₦}1,800) = \text{₦}60,000.
Excess price on 50 cash packages sold at ₦1,800\text{₦}1,800: 50×(₦1,800−₦1,800)=₦050 \times (\text{₦}1,800 - \text{₦}1,800) = \text{₦}0.
Total Excess Realized = ₦40,000+₦60,000=₦100,000\text{₦}40,000 + \text{₦}60,000 = \text{₦}100,000.
Overriding Commission = 10%×₦100,000=₦10,00010\% \times \text{₦}100,000 = \text{₦}10,000.
Overriding commission is awarded on the premium price achieved above the benchmark per package.
5
Sum up all three commissions to determine total earnings.
Total Commission = ₦41,000+₦8,250+₦10,000=₦59,250\text{₦}41,000 + \text{₦}8,250 + \text{₦}10,000 = \text{₦}59,250.
The consignee is entitled to the aggregate of ordinary, del-credere, and overriding commissions as per the agreement.

Key Concept

Computation of Ordinary, Del-Credere, and Overriding Commissions
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Topics

Consignee's Commission: Ordinary, Del-Credere, and Overriding Commission

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