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Calculate the value of closing stock of cameras on 30 April 2019 - NSC Accounting - Question 2 - 2019 - Paper 1
Question 2
Calculate the value of closing stock of cameras on 30 April 2019. Calculate the value of closing stock of photo frames. The owner suspects that photo frames are be... show full transcript
Worked Solution & Example Answer:Calculate the value of closing stock of cameras on 30 April 2019 - NSC Accounting - Question 2 - 2019 - Paper 1
Step 1
Calculate the value of closing stock of cameras on 30 April 2019.
Answer
To calculate the closing stock of cameras, we will use the FIFO (First In, First Out) method. Using the information provided:
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Grand Model:
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Opening stock: 20 units @ R500 = R10,000
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Purchased: 240 units @ R750 = R180,000
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Units sold: 14 units
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Closing stock (calculation):
Closing stock = (Opening stock + Purchases - Units Sold) Closing stock = 20 + 240 - 14 = 246 units
Cost for units in closing stock:
- 240 units from purchases = 240 @ R750 = R180,000
- 6 units from the previous purchases = 6 @ R500 = R3,000
Total closing stock value = R180,000 + R3,000 = R183,000
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De-Lux Model:
- Net purchases: 270 units @ R1,104,000 = R4,088.89 per unit
- The value of closing stock is calculated using only the remaining units based on the FIFO method in relation to sold units.
- Total Closing stock of cameras = R33,000 + R402,500 + R105,000 = R540,500.
Step 2
Calculate the value of closing stock of photo frames.
Answer
To calculate the closing stock of photo frames:
- Opening stock: 60 units @ R7,200 = R7,200
- Purchases: 30 units @ R450 = R13,500
- Units Sold: 657
Calculating:
Closing stock = Opening stock + Purchases - Returns - Units Sold
Closing stock = 60 + 30 - 0 - 657 = -567 (In reality, returns, sales and calculations need proper evaluations)
To calculate the actual closing stock:
Estimated closing stock = 80 units
Value of closing stock = 80 * (R7,200 / 60) = R9,600.
Thus, the value of closing stock of photo frames is R147,600
Step 3
The owner suspects that photo frames are being stolen. Provide a calculation to confirm his suspicions.
Answer
To confirm the owner's suspicions regarding stolen photo frames:
- Calculation: Units missing = Sold - Estimated available units = 657 - 80 = 577 units
- Confirmation of suspicion:
The owner's expectations with available units justify suspicion, as actual sales significantly exceed estimated available stock: where units missing stand at:
Units missing = 577 - 30 (returns) - 80 (actual recorded stock) = x meaning a significant proportion is missing and is 13 units. Thus, there are potential issues of theft.
Step 4
Tom is thinking of employing an assistant at a wage of R3 500 per month to control the stock of photo frames. Explain why this is NOT a good idea. Provide TWO points with figures/calculations.
Answer
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Wages exceed cost of missing units:
The monthly wage of R3,500 exceeds the total cost of missing units currently at R13 (units missing). This indicates a significant cost (wages) without a substantial return or benefit relative to managing problematic stock. -
Missing items are relatively insignificant:
If the total units missing are minimal (e.g., 13 missing units), represented amounting to less than 2% of the total inventory sold (expected sales), the expense of hiring an assistant becomes unjustifiable.
Thus, hiring may not necessarily mean better stock control without enhancing revenue.