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Calculate the following on 28 February 2021, the financial year-end: 4.1.1 Value of the closing stock 4.1.2 Stock turnover rate INFORMATION: The following information relates to the running shoes - NSC Accounting - Question 4 - 2021 - Paper 2
Question 4
Calculate the following on 28 February 2021, the financial year-end: 4.1.1 Value of the closing stock 4.1.2 Stock turnover rate INFORMATION: The following inform... show full transcript
Worked Solution & Example Answer:Calculate the following on 28 February 2021, the financial year-end: 4.1.1 Value of the closing stock 4.1.2 Stock turnover rate INFORMATION: The following information relates to the running shoes - NSC Accounting - Question 4 - 2021 - Paper 2
Step 1
4.1.1 Value of the closing stock
Answer
To calculate the value of the closing stock as of 28 February 2021, we will use the weighted-average cost method.
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Calculate the total purchases value including carriage:
- Total purchases = R2 236 040
- Total pairs purchased: 2 490 pairs
So the average cost per pair = ( ext{Total Purchases} / ext{Total Pairs} = R2 236 040 / 2 490 = R896.95 )
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Calculate the total closing stock:
- Value of closing stock = Average cost per pair × Closing pairs
- Closing pairs = 420
Thus, Value of closing stock = ( R896.95 \times 420 = R376 229. )
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Include the balancer:
Total value on 28 February 2021 = R101 090 + R2 236 040 - (Total sales - Returns)
Hence, final calculation gives:
( R101 090 + R2 236 040 - R459 200 - R378 000 + R769 500 - R25 (Carriage on returns) = R376 229. )
Thus, the value of the closing stock is R376 229.
Step 2
4.1.2 Stock turnover rate
Answer
To calculate the stock turnover rate:
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Formula for Stock Turnover:
[ ext{Stock Turnover Rate} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}} ]
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Calculate Cost of Goods Sold (COGS):
- Total sales: 2 216 units sold at R1,400 each, therefore:
COGS = ( 2 216 \times 896.95 = R1 985 480.8 )
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Calculate Average Inventory:
- Average inventory = (Opening stock + Closing stock) / 2
- Opening stock = 206 pairs, thus:
Average Inventory = ( \frac{(206 + 420)}{2} = R313 )
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Calculate Stock Turnover Rate:
- Substituting in formula gives:
[ ext{Stock Turnover Rate} = \frac{R1 985 480.8}{R313} \approx 6.35 ]
This results in a stock turnover rate of approximately 6.35 times.