Understanding Commission on Consignment: Types and Calculation

The video tutorial covers the basics of consignment accounting, focusing on three types of commissions: ordinary, del credere, and overriding. Ordinary commission is calculated on total sales, del credere commission involves risk management for credit sales, and overriding commission rewards extra efforts. An example problem demonstrates how to calculate these commissions.

What is the primary role of a consignee in a consignment arrangement?

• To manufacture goods

• To sell goods on behalf of the consignor

• To purchase goods from the consignor

• To provide storage for goods

How is ordinary commission typically calculated?

• As a fixed amount per item

• As a percentage of the total sales

• As a percentage of the profit

• As a percentage of the cost price

What is the main purpose of Del Credere Commission?

• To reward the consignee for selling at a higher price

• To incentivize the consignee to sell more units

• To compensate the consignee for the risk of bad debts

• To cover the cost of transportation

If a consignee is given Del Credere Commission, who bears the loss of bad debts?

• The customer

• The consignee

• The insurance company

• The consignor

What is Overriding Commission primarily used for?

• To reward extra efforts by the consignee

• To cover transportation costs

• To compensate for storage costs

• To cover manufacturing defects

In what scenario might a consignee receive Overriding Commission?

• When selling at a lower price

• When introducing a product to a new market

• When storing goods for a long period

• When manufacturing goods

In the example problem, what was the selling price per shirt that Peter achieved?

• ₹300

• ₹375

• ₹350

• ₹400

What percentage of commission was Peter entitled to on the total sales?

• 15%

• 20%

• 5%

• 10%

How is the surplus price calculated in the example problem?

• Difference between cost price and selling price

• Difference between specified price and selling price

• Difference between market price and selling price

• Difference between cost price and market price

What is the total commission payable to Peter in the example problem?

• ₹78,125

• ₹87,500

• ₹95,000

• ₹68,750