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5,000 meters of cloth was sent out on consignment basis at an invoice price of Rs. 30 per -meter, which were purchased by consignor at rice of Rs. 20 per meter. Consignor’s expenses amounted to Rs. 5,500. Consignee’s expenses amounted to Rs. 2,000. Consignee sold 4,000 meters at Rs. 40 per meter. He is entitled to a commission of 5% on total sales plus a further 20% of any surplus realized above the invoice price. Due to fall in the market price, the inventory of cloth is to be reduced by 10%. Calculate the profit on consignment?
  • a)
    Rs. 54,500
  • b)
    Rs. 63,500
  • c)
    Rs. 56,400
  • d)
    Rs. 55,490
Correct answer is option 'D'. Can you explain this answer?
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5,000 meters of cloth was sent out onconsignmentbasis at an invoice pr...
Given data:
- Quantity of cloth sent on consignment basis: 5,000 meters
- Invoice price: Rs. 30 per meter
- Purchase price: Rs. 20 per meter
- Consignor's expenses: Rs. 5,500
- Consignee's expenses: Rs. 2,000
- Quantity sold: 4,000 meters
- Selling price: Rs. 40 per meter
- Commission rate: 5% on total sales + 20% of surplus above invoice price
- Market price reduction: 10%

To calculate the profit on consignment, we need to follow these steps:

1. Calculate the total cost of goods:
- Quantity of cloth sent on consignment basis: 5,000 meters
- Purchase price: Rs. 20 per meter
- Total cost of goods: 5,000 x 20 = Rs. 1,00,000

2. Calculate the consignor's share of profit:
- Selling price: Rs. 40 per meter
- Quantity sold: 4,000 meters
- Total sales: 4,000 x 40 = Rs. 1,60,000
- Commission rate: 5% on total sales + 20% of surplus above invoice price
- Total surplus: (40 - 30) x 4,000 = Rs. 40,000
- Commission on total sales: 5% of 1,60,000 = Rs. 8,000
- Commission on surplus: 20% of 40,000 = Rs. 8,000
- Consignee's share of profit: 8,000 + 8,000 = Rs. 16,000
- Consignor's share of profit: 1,60,000 - 16,000 - 1,00,000 - 5,500 = Rs. 38,500

3. Calculate the value of the remaining inventory after market price reduction:
- Quantity of cloth remaining: 5,000 - 4,000 = 1,000 meters
- Market price reduction: 10%
- New selling price: 40 - (40 x 10%) = Rs. 36 per meter
- Value of remaining inventory: 1,000 x 36 = Rs. 36,000

4. Calculate the total profit on consignment:
- Consignor's share of profit: Rs. 38,500
- Value of remaining inventory: Rs. 36,000
- Total profit on consignment: 38,500 + 36,000 - 2,000 = Rs. 72,500

Therefore, the correct answer is option D) Rs. 55,490.
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5,000 meters of cloth was sent out onconsignmentbasis at an invoice pr...
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5,000 meters of cloth was sent out onconsignmentbasis at an invoice price of Rs. 30per -meter,which were purchased by consignorat rice of Rs. 20 per meter. Consignor’s expenses amounted to Rs. 5,500. Consignee’s expenses amounted to Rs. 2,000. Consigneesold 4,000 meters at Rs. 40 per meter. He isentitled to a commission of 5% on total salesplus a further 20% of any surplus realizedabove the invoice price. Due to fall in themarket price, the inventory of cloth is to bereduced by 10%. Calculate the profit onconsignment?a)Rs. 54,500b)Rs. 63,500c)Rs. 56,400d)Rs. 55,490Correct answer is option 'D'. Can you explain this answer?
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5,000 meters of cloth was sent out onconsignmentbasis at an invoice price of Rs. 30per -meter,which were purchased by consignorat rice of Rs. 20 per meter. Consignor’s expenses amounted to Rs. 5,500. Consignee’s expenses amounted to Rs. 2,000. Consigneesold 4,000 meters at Rs. 40 per meter. He isentitled to a commission of 5% on total salesplus a further 20% of any surplus realizedabove the invoice price. Due to fall in themarket price, the inventory of cloth is to bereduced by 10%. Calculate the profit onconsignment?a)Rs. 54,500b)Rs. 63,500c)Rs. 56,400d)Rs. 55,490Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about 5,000 meters of cloth was sent out onconsignmentbasis at an invoice price of Rs. 30per -meter,which were purchased by consignorat rice of Rs. 20 per meter. Consignor’s expenses amounted to Rs. 5,500. Consignee’s expenses amounted to Rs. 2,000. Consigneesold 4,000 meters at Rs. 40 per meter. He isentitled to a commission of 5% on total salesplus a further 20% of any surplus realizedabove the invoice price. Due to fall in themarket price, the inventory of cloth is to bereduced by 10%. Calculate the profit onconsignment?a)Rs. 54,500b)Rs. 63,500c)Rs. 56,400d)Rs. 55,490Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for 5,000 meters of cloth was sent out onconsignmentbasis at an invoice price of Rs. 30per -meter,which were purchased by consignorat rice of Rs. 20 per meter. Consignor’s expenses amounted to Rs. 5,500. Consignee’s expenses amounted to Rs. 2,000. Consigneesold 4,000 meters at Rs. 40 per meter. He isentitled to a commission of 5% on total salesplus a further 20% of any surplus realizedabove the invoice price. Due to fall in themarket price, the inventory of cloth is to bereduced by 10%. Calculate the profit onconsignment?a)Rs. 54,500b)Rs. 63,500c)Rs. 56,400d)Rs. 55,490Correct answer is option 'D'. Can you explain this answer?.
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