CMA Foundation · Fundamentals of Financial and Cost Accounting · Consignment
Anil & Co. consigned 600 units at a cost of ₹120 per unit, total ₹72,000, and paid ₹12,000 as freight and packing. During transit 60 units were destroyed by fire, which is an abnormal loss. What amount should be credited to the Consignment Account for this abnormal loss?
The abnormal loss credited to the Consignment Account is ₹8,400. Invoice cost of ₹72,000 plus freight and packing of ₹12,000 gives ₹84,000 for 600 units, or ₹140 per unit. The 60 units lost are valued at ₹140 each, so the loss is ₹8,400.
- A₹7,200
- B₹8,400Correct
- C₹9,000
- D₹12,000
Explanation
Total cost to the point of loss is ₹72,000 + ₹12,000 = ₹84,000 for 600 units, which is ₹140 per unit. The loss on 60 units is 60 × ₹140 = ₹8,400. Using only the invoice cost gives ₹7,200, which wrongly leaves out the proportionate freight and packing.
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