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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.
Answer
To calculate the closing stock using the FIFO method, we need to take the most recent purchases and assign their costs. The calculation is as follows:
- Opening Stock: 420 units at R2,175 = R913,500
- Purchases:
- September 2017: 850 units at R2,250 = R1,912,500
- December 2017: 980 units at R2,660 = R2,609,800
- March 2018: 875 units at R2,563 = R2,240,875
Total Available = Opening stock + Purchases = 420 + 3,155 = 3,575 units
The closing stock is 496 units, so we start with the most recent purchases:
- From September: 850 units at R2,250
- 496 - 425 (first we take all of the opening stock) = 71 units from September stock.
Calculating:
- 425 units from Opening: R913,500
- 71 units from September: 71 x R2,250 = R159,750
Total Closing Stock = R913,500 + R159,750 = R1,073,250
Step 2
5.2.2 Charles suspects that suitcases have been stolen. Provide a calculation to support his concern.
Answer
To assess the situation, we compare the stock balances from the opening and closing periods. Opening stock: 420 units + Purchases: 3,155 units - Sales: 3,050 units = Available Stock: 3,575 units
Closing Stock: 496 units.
Thus, the calculation shows:
Available stock is 3,575 units while the closing stock is only 496 units, meaning there could be a discrepancy.
Calculation of missing items:
3,575 - 496 = 3,079 units missing. This significant difference may indicate theft.
Step 3
5.2.3 Calculate for how long his closing stock is expected to last.
Answer
To calculate how long the closing stock is expected to last:
Total closing stock value = R1,500,030. Sales per day = \ rac{3,050 ext{ units}}{365 ext{ days}} = 8.36 ext{ units per day}
Thus, the duration the closing stock can last is calculated as follows:
egin{align*} ext{Number of days stock lasts} &= rac{496 ext{ units}}{8.36 ext{ units per day}} \ &= 59.4 ext{ days} (approximately 2 months) \end{align*}
Step 4
5.2.4 State ONE problem with keeping too much stock on hand and ONE problem with keeping insufficient stock on hand.
Answer
One problem with keeping too much stock on hand is that inventory can become obsolete, leading to losses from unsold or outdated items.
Conversely, one problem with keeping insufficient stock is that it can lead to missed sales opportunities, as customers may turn to competitors if items are not available.