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CMA Foundation · Fundamentals of Financial and Cost Accounting · Consignment

Ravi Traders consigned 500 units costing Rs 100 each to Mehta & Co. Ravi paid freight of Rs 5,000 and insurance of Rs 1,000 on the consignment. Mehta paid godown rent of Rs 2,000 after receiving the goods. 400 units were sold. Ignoring abnormal loss, what is the value of closing stock of 100 units?

Closing stock is Rs 11,200. Goods cost Rs 50,000 and freight plus insurance of Rs 6,000 are added, giving Rs 56,000 for 500 units, or Rs 112 per unit. Godown rent paid by the consignee after receipt is not included, so 100 units are valued at Rs 11,200.

  1. ARs 10,000
  2. BRs 11,200Correct
  3. CRs 11,600
  4. DRs 12,400

Explanation

Total cost of goods = 500 x 100 = 50,000. Add direct expenses of freight 5,000 and insurance 1,000 to get 56,000. Per unit this is Rs 112, so 100 units = Rs 11,200. Godown rent after receipt is an indirect expense and is not included in stock, so Rs 11,600 and 12,400 are wrong because they include it.

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