Max limited supplies goods to its New Delhi branch at cost plus 25% ag...
Introduction:
In this scenario, Max Limited is a company that supplies goods to its New Delhi branch. The branch receives the goods at cost plus 25% markup. The branch then sells the goods at the invoice price and remits the proceeds back to the head office. There are also various expenses incurred by both the branch and the head office.
Explanation:
Goods supplied:
- Max Limited supplies goods to its New Delhi branch at cost plus 25% markup.
- The invoice price of the goods supplied is Rs. 24,000.
- The cost of the goods can be calculated by dividing the invoice price by 1 plus the markup percentage.
- Cost of goods = Rs. 24,000 / (1 + 0.25) = Rs. 19,200.
Remittance from the branch:
- The branch remits Rs. 25,000 back to the head office.
- This represents the sales proceeds from the goods sold by the branch.
Expenses paid by the head office:
- The head office pays Rs. 900 for salaries and wages.
- The head office also pays Rs. 600 for rent and rates.
Sundry expenses from the branch:
- The branch incurs Rs. 2,000 in sundry expenses.
- These expenses could include miscellaneous costs such as maintenance, repairs, or office supplies.
Returns from the branch:
- The branch returns goods to the head office with an invoice price of Rs. 150.
- The head office deducts the value of these returns from the branch's account.
Stock of goods:
- The branch has a stock of goods with a value of Rs. 8,000.
- This represents the value of the remaining goods that have not been sold by the branch.
Overall, this scenario highlights the sales and expenses related to the New Delhi branch of Max Limited. The branch sells goods supplied by the head office, remits the sales proceeds, incurs sundry expenses, and returns goods if necessary. The head office pays for salaries, wages, rent, and rates. The stock of goods represents the value of the remaining inventory held by the branch.
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