Consignment Shipment by Indigo Corporation to Gooch Company

What is the scenario of the consignment shipment by Indigo Corporation to Gooch Company?

How are consignment, freight costs, and local advertising related in this transaction?

The Indigo Corporation shipped $20,900 worth of merchandise on consignment to the Gooch Company. As part of the shipment, Indigo also paid $2,000 for freight costs. The Gooch Company, on the other hand, paid $460 for local advertising. In this scenario, the key terms to understand are "consignment" and "freight costs."

1. Consignment: When merchandise is shipped on consignment, it means that the owner of the merchandise (Indigo Corporation) is allowing another party (Gooch Company) to sell the goods on their behalf. The ownership of the merchandise remains with Indigo until it is sold by Gooch Company. This arrangement is often used when the owner wants to reach a broader market or when the owner and the seller want to share the risk and reward of selling the goods.

2. Freight Costs: Freight costs refer to the expenses associated with transporting goods from one location to another. In this case, Indigo Corporation paid $2,000 for the freight costs of shipping the merchandise to the Gooch Company. Freight costs can include expenses like transportation fees, packaging, handling, insurance, and customs fees.

It is important to note that the amount paid by Gooch Company for local advertising ($460) is not directly related to the shipment or freight costs. Local advertising is an additional expense incurred by Gooch Company to promote the merchandise or their business locally.

To summarize:

• Indigo Corporation shipped $20,900 worth of merchandise to the Gooch Company on consignment.
• Indigo Corporation paid $2,000 for the freight costs associated with shipping the merchandise.
• Gooch Company paid $460 for local advertising, which is a separate expense unrelated to the shipment or freight costs.

By understanding the roles of consignment, freight costs, and local advertising in this scenario, both Indigo Corporation and Gooch Company can effectively manage their costs and responsibilities in the consignment arrangement.