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In this question, stock of worth Rs.6,900/- has been transferred from Khadi to silk department. Why the selling price of Khadi department has not been considered as cost for Silk department?
Answers (8)
Sahibdeep Singh
Check the last entry in Silk Stock A/c in left side
In Silk stock a/c, cost is considered as Rs.6,900/- but not as Rs.9,200 (i.e.) Rs.6,900 + Rs.2,300 (Markup of Khadi)
Himanshu Somani
Silk and khadi department will both do their respective mark ups
Why Rs.9,200/- is not considered as cost for silk department?
Thread Starter
Nivedha BalajiWhy Rs.9,200/- is not considered as cost for silk department?
Stock is transferred from khadi dept to sales dept and not sold to it . So transfer will obviously be for cost price only
Thread Starter
Nivedha BalajiWhy Rs.9,200/- is not considered as cost for silk department?
It is because from an organization perspective, mark ups to Khadi are 33-1/3% and Silk are 50%. Debit to Silk Stock will be thus be 6900+ 50% and Credit to to Khadi Stock will be 6900+ 33-1/3%. Here, it's a case of transfer. Organization would not want to allow transfers from Khadi to Silk to allow Silk lower cost and ultimately higher profits. Hope this clarifies
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