PACKER'S SUITCASE SHOP Charles Packer sells travel suitcases. The year-end is 30 June 2018. REQUIRED: 5.2.1 Calculate the value of the closing stock on 30 June 2018 using the first-in-first-out (FIFO) method. 5.2.2 Charles suspects that suitcases have been stolen. Provide a calculation to support his concern. 5.2.3 Calculate for how long his closing stock is expected to last. - State ONE problem with keeping too much stock on hand and ONE problem with keeping insufficient stock on hand. INFORMATION: Stock balances: Opening stock - UNITS - 420 - UNIT PRICE - R2 175 - TOTAL - R913 500 Closing stock - 496 Purchases, returns and carriage: Purchases - UNITS - 3 155 - UNIT PRICE - R2 250 - TOTAL - R1 912 500 September 2017 - 850 - R2 250 - R1 912 500 December - 980 - R2 175 - R2 617 800 March 2018 - 875 - R2 563 750 June* - (from June purchases) - 25 - R3 040 - R76 000 Sales: 3 050 travel suitcases were sold at R4 200 each.

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PACKER'S SUITCASE SHOP Charles Packer sells travel suitcases - NSC Accounting - Question 5 - 2018 - Paper 1

Question 5

PACKER'S SUITCASE SHOP Charles Packer sells travel suitcases. The year-end is 30 June 2018. REQUIRED: 5.2.1 Calculate the value of the closing stock on 30 June 20... show full transcript

Worked Solution & Example Answer:PACKER'S SUITCASE SHOP Charles Packer sells travel suitcases - NSC Accounting - Question 5 - 2018 - Paper 1

Step 1

5.2.1 Calculate the value of the closing stock on 30 June 2018 using the first-in-first-out (FIFO) method.

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Answer

To determine the value of the closing stock using the FIFO method, we will take into account the earliest purchased units first. The closing stock is 496 units. Starting with the opening stock:

Opening Stock: 420 units at R2,175 each = R913,500.
From the purchases made, we'll use the next available batch:
- September 2017: 850 units at R2,250 each.
- Since we already account for 420 from the opening stock, we will take an additional 76 units (496 - 420 = 76).
Remaining 76 units from September: 76 units at R2,250 each = R171,000.

Therefore, the total value of the closing stock:

Opening Stock Total: R913,500
Additional 76 units from September: R171,000

Total Closing Stock Value = R913,500 + R171,000 = R1,084,500.

Step 2

5.2.2 Charles suspects that suitcases have been stolen. Provide a calculation to support his concern.

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Answer

To support Charles' concern regarding stolen suitcases, we can analyze the stock movement:

Opening Stock: 420 units
Purchases: 3,155 units
Sales: 3,050 units
Closing Stock: 496 units

Calculation:

Number of units accounted for: 420 + 3,155 (purchases) - 3,050 (sales) = 1,525 units.
Actual closing stock is 496 units.
Stock discrepancy = 1,525 - 496 = 1,029 units missing, indicating that the stock expected on-hand does not match the inventory recorded, supporting the suspicion of theft.

Step 3

5.2.3 Calculate for how long his closing stock is expected to last.

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Answer

To estimate how long the closing stock is expected to last:

Closing Stock Total: 496 units
Sales per month: Average sales can be calculated from the total sales of 3,050 units over one year or 12 months.
- Monthly sales = 3,050 / 12 ≈ 254.17 units.
Stock Duration: Closing stock duration in months = Total units in stock / Monthly sales = 496 / 254.17 ≈ 1.95 months.

Thus, the closing stock is expected to last approximately 1.95 months (about 2 months).

Step 4

State ONE problem with keeping too much stock on hand.

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Answer

One problem with keeping too much stock on hand is that it can become obsolete and thus be unsold, leading to financial losses and increased holding costs.

Step 5

State ONE problem with keeping insufficient stock on hand.

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Answer

One problem with keeping insufficient stock on hand is that it can lead to missed sales opportunities, as customers may choose to shop elsewhere if products are out of stock.

PACKER'S SUITCASE SHOP Charles Packer sells travel suitcases - NSC Accounting - Question 5 - 2018 - Paper 1

Worked Solution & Example Answer:PACKER'S SUITCASE SHOP Charles Packer sells travel suitcases - NSC Accounting - Question 5 - 2018 - Paper 1

5.2.1 Calculate the value of the closing stock on 30 June 2018 using the first-in-first-out (FIFO) method.

5.2.2 Charles suspects that suitcases have been stolen. Provide a calculation to support his concern.

5.2.3 Calculate for how long his closing stock is expected to last.

State ONE problem with keeping too much stock on hand.

State ONE problem with keeping insufficient stock on hand.

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