Goods sent on consignment= 200000 consignors expenses = 5000 consignee...
Profit on Consignment Calculation
- Goods sent on consignment = 200000
- Consignors expenses = 5000
- Consignee expenses = 2000
- Cash sales = 100000
- Credit sale = 110000
- Closing stock = 40000
- Ordinary commission = 3000
- Del credere commission = 2000
- Bad debts = 2000
Calculation of Total Revenue
Total Revenue = Cash Sales + Credit Sales = 100000 + 110000 = 210000
Calculation of Cost of Goods Sold
Cost of Goods Sold = Opening Stock + Goods Sent on Consignment - Closing Stock = 0 + 200000 - 40000 = 160000
Calculation of Gross Profit
Gross Profit = Total Revenue - Cost of Goods Sold = 210000 - 160000 = 50000
Calculation of Net Profit
Net Profit = Gross Profit - Consignors Expenses - Consignee Expenses - Ordinary Commission - Del Credere Commission - Bad Debts
Net Profit = 50000 - 5000 - 2000 - 3000 - 2000 - 2000 = 36000
Explanation
Consignment is a business arrangement where the goods are sent by the consignor to the consignee for selling them on behalf of the consignor. The consignor retains the ownership of the goods until they are sold by the consignee. The consignee earns a commission on the sales made. In this scenario, the goods sent on consignment were worth 200000. The consignor incurred expenses of 5000 and the consignee incurred expenses of 2000. The total revenue earned from cash and credit sales was 210000. The closing stock was valued at 40000. The ordinary commission earned by the consignee was 3000, and the del credere commission was 2000. The bad debts amounted to 2000.
To calculate the profit on consignment, we first calculated the total revenue, which includes cash sales and credit sales. Next, we calculated the cost of goods sold, which includes opening stock, goods sent on consignment, and closing stock. The gross profit was calculated by subtracting the cost of goods sold from the total revenue. Finally, the net profit was calculated by subtracting all the expenses incurred from the gross profit.