Q.Rama Rao of Hyderabad consigned 1,000 units of a product, costing Rs 50 per unit, to Suresh of Vijayawada. Rama Rao paid Rs 2,500 towards freight and insurance to send the goods. Suresh sold 800 units during the year and paid Rs 950 as non-recurring clearing charges and Rs 500 as godown rent (recurring) on the whole consignment. Calculate the value of the 200 units of unsold stock at the end of the year.

Unsold stock is valued at proportionate cost plus the proportionate direct expenses of both parties; the consignee's recurring godown rent is left out of this calculation altogether.

Direct expenses to be included in stock valuation are the consignor's freight and insurance (Rs 2,500) and the consignee's non-recurring clearing charges (Rs 950) — the godown rent of Rs 500 is a recurring expense and is left out of the stock calculation, though it is still charged fully to the Consignment Account as an expense of the period.

Cost plus direct expenses per unit = Rs 53,450 / 1,000 units = Rs 53.45 per unit.

Value of 200 unsold units = 200 x Rs 53.45 = Rs 10,690.

Re-checking against the split method given in the syllabus (proportionate cost, then proportionate expenses, added separately) confirms the same figure: proportionate cost = (200/1,000) x 50,000 = Rs 10,000; proportionate direct expenses = (200/1,000) x (2,500 + 950) = (200/1,000) x 3,450 = Rs 690; total = Rs 10,000 + Rs 690 = Rs 10,690.

Cost per unit + direct expenses per unit, multiplied by unsold quantity; godown rent (recurring) excluded.