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

Alhaji Bello consigned 1,0001,000 packages of goods to Chidi with instructions to sell them at a minimum benchmark price of ₦1,5001,500 per package. Chidi sold 400400 packages for cash at ₦1,8001,800 each and 600600 packages on credit at ₦2,0002,000 each. The consignment agreement stipulates 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 value realized above the minimum benchmark price. What is the total commission payable to Chidi in Naira?

Answer: 168000 ₦

Answer

The total commission payable to Chidi is ₦168,000.
Total sales generated are ₦1,920,000₦1,920,000 (₦720,000₦720,000 cash + ₦1,200,000₦1,200,000 credit). Ordinary commission at 5%5\% equals ₦96,000₦96,000. Del-credere commission at 2.5%2.5\% on credit sales of ₦1,200,000₦1,200,000 equals ₦30,000₦30,000. Overriding commission at 10%10\% on the surplus of ₦420,000₦420,000 over the benchmark price of ₦1,500,000₦1,500,000 equals ₦42,000₦42,000. Combining these three amounts yields a total commission of ₦168,000₦168,000.

Step-by-Step Solution

1
Calculate cash sales, credit sales, and total sales revenue
Cash Sales = 400×₦1,800=₦720,000400 \times ₦1,800 = ₦720,000; Credit Sales = 600×₦2,000=₦1,200,000600 \times ₦2,000 = ₦1,200,000; Total Sales = ₦1,920,000₦1,920,000
Determining gross revenue is necessary to compute ordinary and overriding commissions.
2
Calculate Ordinary Commission
5%×₦1,920,000=₦96,0005\% \times ₦1,920,000 = ₦96,000
Ordinary commission is earned on overall gross sales value.
3
Calculate Del-Credere Commission
2.5%×₦1,200,000=₦30,0002.5\% \times ₦1,200,000 = ₦30,000
Del-credere commission is calculated specifically on credit sales.
4
Calculate Overriding Commission
Benchmark Minimum Value = 1,000×₦1,500=₦1,500,0001,000 \times ₦1,500 = ₦1,500,000; Surplus Realized = ₦1,920,000−₦1,500,000=₦420,000₦1,920,000 - ₦1,500,000 = ₦420,000; Overriding Commission = 10%×₦420,000=₦42,00010\% \times ₦420,000 = ₦42,000
Overriding commission rewards the agent for securing a selling price higher than the minimum threshold specified by the consignor.
5
Sum up all commission elements
₦96,000+₦30,000+₦42,000=₦168,000₦96,000 + ₦30,000 + ₦42,000 = ₦168,000
The total payout to the consignee is the sum of ordinary, del-credere, and overriding commissions.

Key Concept

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

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