Question

A sends goods worth Rs. $50,000$ to B for sales for $5\%$ commission. He incurs Rs. $1,500$ for freight and Rs. $500$ for insurance. The goods are sold for Rs. $60,000$, consignee incurs Rs. $500$ unloading expenses and Rs. $500$ rent. B sends a draft after reducing his expenses and commission. Profit or loss on consignment _______________.

• A. Rs.$4000$
• B. Rs.$2000$
• C. Rs.$6000$
• D. Rs.$5000$

Answer 1

Answer: (A)

Rs.$4000$

Cost of goods sent on consignment = Rs. 50,000

Expenses incurred by the consignor = freight + insurance = Rs. 1,500 + Rs. 500 = Rs. 2,000

Expenses incurred by the consignee = unloading + rent = Rs. 500 + Rs. 500 = Rs. 1,000

Commission payable to B = 5% of sales = 5% x Rs. 60,000 = Rs.3,000

Amount Remitted by B to A after deducting commission and expenses incurred by him = Rs. 60,000 - Rs. 3,000 - Rs. 1,000 = Rs. 56,000

Profit on consignment = Amount received from B for sale of goods sent on consignment - Cost of goods sold - Expenses incurred by A = Rs. 56,000 - Rs. 50,000 - Rs. 2,000 = Rs. 4,000