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CMA Foundation · Fundamentals of Financial and Cost Accounting · Consignment

Which of the following expenses incurred by the consignee is treated as a selling expense that is NOT included in the valuation of unsold consignment stock?

Godown rent and salesman's salary incurred after the goods reach the consignee are selling expenses and are excluded from stock valuation. They are charged wholly to the consignment account, whereas octroi, carriage inward and transit insurance are direct expenses that are included in the cost of stock.

  1. AOctroi paid on receipt of goods
  2. BCarriage inward paid by the consignee to bring goods to his godown
  3. CGodown rent and salesman's salary incurred by the consignee after receiving the goodsCorrect
  4. DInsurance paid during transit

Explanation

Expenses up to the point of receiving goods at the godown are direct and form part of stock cost. Godown rent, salesmen's salary and similar costs after receipt relate to selling and are charged wholly to the consignment account. The other options are direct expenses to bring goods to the godown.

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