Audu consigned 400 cartons of goods costing \text{₦}5,000 per carton to Emeka. Audu paid c… — JAMB UTME

Audu consigned $400$ cartons of goods costing $\text{₦}5,000$ per carton to Emeka. Audu paid carriage of $\text{₦}80,000$ and transit insurance of $\text{₦}40,000$ . Emeka received the consignment and paid landing charges of $\text{₦}60,000$ , godown rent of $\text{₦}30,000$ , and selling expenses of $\text{₦}50,000$ . At the end of the accounting period, Emeka reported that $300$ cartons had been sold. What is the total valuation of the unsold consignment stock in Naira?

Answer: 545000 ₦

Answer

The total valuation of the unsold consignment stock is ₦545,000.

Unsold consignment stock is valued at cost plus a proportionate share of all non-recurring (direct) expenses incurred by both the consignor and consignee. The total non-recurring expenses are ₦120,000 (consignor carriage and transit insurance) plus ₦60,000 (consignee landing charges), totaling ₦180,000. Since 100 out of 400 cartons remain unsold (1/4 of total consignment), the proportionate direct expense share is ₦45,000. Adding this to the basic cost of 100 cartons (₦500,000) gives a final valuation of ₦545,000.

Step-by-Step Solution

Calculate the quantity of unsold stock and its basic cost price

Unsold units = 400 - 300 = 100 units. Basic cost = 100 × ₦5,000 = ₦500,000.

Stock valuation starts with the original cost price of the unsold units.

Identify non-recurring (direct) expenses incurred by both consignor and consignee

Consignor expenses (carriage + transit insurance) = ₦80,000 + ₦40,000 = ₦120,000. Consignee non-recurring expenses (landing charges) = ₦60,000. Total direct expenses = ₦180,000.

Only direct/non-recurring expenses incurred to bring goods to their present location are included in unsold stock valuation. Recurring expenses (godown rent and selling expenses) are excluded.

Apportion the direct non-recurring expenses to the unsold stock

Proportionate share = (100 / 400) × ₦180,000 = ₦45,000.

Direct expenses are distributed proportionally based on the ratio of unsold units to total units consigned.

Sum basic cost price and proportionate direct expenses

Valuation of unsold stock = ₦500,000 + ₦45,000 = ₦545,000.

The final inventory value is the sum of basic cost and allocated non-recurring expenses.

Key Concept

Valuation of Unsold Consignment Stock incorporating cost price and proportionate non-recurring expenses

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