CMA Intermediate · Financial Accounting · Consignment
Verma Industries consigned goods invoiced at 25% above cost. The goods sent were Rs 3,75,000 at invoice price. What was the cost of the goods consigned, and what is the loading?
The cost is Rs 3,00,000 and the loading is Rs 75,000. Since the invoice price is 125% of cost, dividing Rs 3,75,000 by 1.25 gives cost, and the difference is the loading. Taking 25% of the invoice price would wrongly treat it as a markup on selling price.
- ACost Rs 3,00,000; loading Rs 75,000Correct
- BCost Rs 2,81,250; loading Rs 93,750
- CCost Rs 3,00,000; loading Rs 93,750
- DCost Rs 3,18,750; loading Rs 56,250
Explanation
Invoice price is 125% of cost. Cost = 3,75,000 x 100/125 = Rs 3,00,000. Loading = 3,75,000 - 3,00,000 = Rs 75,000. Applying 25% on the invoice price (Rs 93,750) wrongly treats the markup as a percentage of the invoice value.
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