Q.A consigned goods costing ₹1,00,000 to B, invoicing them at ₹1,20,000 (a 20% loading over cost, to keep B unaware of the actual cost and profit margin). B is entitled to an ordinary commission of 5% on sales and an over-riding commission of 10% on any amount realised in excess of the invoice price. B sold the entire consignment for ₹1,50,000. Compute the total commission payable to B.

Ordinary commission is on the full sale proceeds; over-riding commission is only on the amount realised above the ₹1,20,000 invoice price.

Ordinary commission = Total sale proceeds × 5% = 1,50,000 × 5% = ₹7,500.

Over-riding commission rewards B for selling ABOVE the invoice price of ₹1,20,000 (the price loaded onto the goods precisely to keep A's actual cost of ₹1,00,000 confidential from B), so it is calculated only on the excess actually achieved over that invoice price, not on the whole of the sales:

Excess over invoice price = 1,50,000 − 1,20,000 = ₹30,000.

Over-riding commission = 30,000 × 10% = ₹3,000.

Total commission payable to B = Ordinary commission + Over-riding commission = 7,500 + 3,000 = ₹10,500. …

A frequent error is calculating the over-riding commission on the full sale proceeds of ₹1,50,000 instead of only on the ₹30,000 excess above the invoice price — over-riding commission always applies to the exc …