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

Danladi Enterprises consigned 200200 crates of fruit juice to Segun at an agreed benchmark selling price of ₦5,0005,000 per crate. Segun's terms of remuneration comprise an ordinary commission of 5%5\% on total sales, a del-credere commission of 2.5%2.5\% on credit sales, and an overriding commission of 10%10\% on any surplus sales revenue realized above the benchmark price. During the period, Segun sold 120120 crates for cash and 8080 crates on credit, all at a uniform price of ₦6,0006,000 per crate. What is the total commission payable to Segun?

  1. ₦92,000Answer
  2. B
    ��110,000
  3. C
    ₦72,000
  4. D
    ₦192,000

Answer

The total commission payable to Segun is ₦92,000.
The correct total commission of ₦92,000 is determined by adding ordinary commission of ₦60,000 (5% of total sales ₦1,200,000), del-credere commission of ₦12,000 (2.5% of credit sales ₦480,000), and overriding commission of ₦20,000 (10% of the ₦200,000 excess realized over the benchmark price of ₦1,000,000).

Step-by-Step Solution

1
Calculate cash sales, credit sales, and total sales revenue
Cash sales = 120 × ₦6,000 = ₦720,000; Credit sales = 80 × ₦6,000 = ₦480,000; Total sales = ₦720,000 + ₦480,000 = ₦1,200,000.
Establishing individual revenue components is necessary to apply the respective commission rates.
2
Calculate the Ordinary Commission
Ordinary Commission = 5% of ₦1,200,000 = ₦60,000.
Ordinary commission is calculated on total sales revenue.
3
Calculate the Del-Credere Commission
Del-Credere Commission = 2.5% of ₦480,000 = ₦12,000.
Unless stated otherwise, del-credere commission is computed specifically on credit sales.
4
Calculate the Overriding Commission
Benchmark value = 200 × ₦5,000 = ₦1,000,000. Surplus revenue = ₦1,200,000 - ₦1,000,000 = ₦200,000. Overriding Commission = 10% of ₦200,000 = ₦20,000.
Overriding commission is granted on the excess price realized over the specified benchmark price.
5
Sum all commission types to determine total remuneration
Total Commission = ₦60,000 + ₦12,000 + ₦20,000 = ₦92,000.
Combining ordinary, del-credere, and overriding commissions yields total commission payable.

Key Concept

Consignee Commission Types and Computation
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Topics

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

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