Question

______ On August 5, 2021, Famous Furniture shipped 20 dining sets on consignment to Furniture Outlet, Inc. The cost of each dining set was $350 each. The cost of shipping the dining sets amounted to $1,800 and was paid for by Famous Furniture. On December 30, 2021, the consignee reported the sale of 15 dining sets at $850 each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising expense of $300, and installation and setup costs of $390. The total profit on units sold for the consignor is

a.   $11,295

b.   $4,695

c.   $6,045

d.   $9,945

Answer 1

Number of units consigned = 20
Cost per unit = $350
Shipping charges = $1,800
Total cost of units consigned = Number of units consigned x Cost per unit + Shipping charges
= 20 x 350 + 1,800
= 7,000 + 1,800
= $8,800
Number of units sold by consignee = 15
Cost of goods sold by consignee = Total cost of units consigned x Number of units sold by consignee/Number of units consigned
= 8,800 x 15/20
= $6,600
Inventory value of the units unsold = Total cost of units consigned - Cost of goods sold by consignee
= 8,800 – 6,600
= $2,200

Sales revenue (15 x 850)	12,750
Cost of goods sold	-6,600
Consignee's commission (12,750 x 6%)	-765
Advertising	-300
Installation cost	-390
Profit	$4,695

The total profit on units sold for the consignor is $4,695.

Correct option is b.