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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 determine the closing stock of cameras, we will apply the FIFO method.
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Grand Model:
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Units Sold: 14
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Opening Stock: 20 units
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Purchases: 240 units at R5 700 each
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Remaining stock after sales: 20 + 240 - 14 = 246 units
From the opening and purchased stock, we calculate:
- Closing stock (Grand Model): 20 units * R5 500 + 226 units * R7 750 = R33 500 + R402 500 = R435 000
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De-Lux Model:
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Units sold: 235
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Opening Stock: 0
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Purchases: 270 units at R1 104 000
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Remaining stock after sales: 270 - 235 = 35 units
Therefore:
- Closing stock (De-Lux Model): 35 units * R4 200 = R147 600
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Total Closing Stock of Cameras:
- Grand Model: R435 000
- De-Lux Model: R147 600
- Total: R435 000 + R147 600 = R582 600.
Step 2
Calculate the value of closing stock of photo frames.
Answer
To find the closing stock of photo frames, we will compute as follows:
- Opening stock: 60 units
- Purchases: R7 200
- Returns: 30 units
- Total sales: 657 units
- Calculate Total Available Units: 60 (opening) + (70 (purchases) - 30 (returns)) = 100 units available.
- Calculate Closing Stock: 100 available - 657 sold = 80 units.
- Calculate Value of Closing Stock:
- Units Sold: 657
- Value of Closing Stock: 80 units * R4 500 = R360 000.
- Therefore, the closing stock value is R360 000.
Step 3
The owner suspects that photo frames are being stolen. Provide a calculation to confirm his suspicions.
Answer
To confirm the suspicion of theft, the calculation of the difference in units must be analyzed:
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Expected Stock Calculation:
- Expected closing stock = 80
- Actual stock calculated = 657 sold
- Thus, the missing stock is: 657 sold - 80 closing = 13 units.
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Conclusion: There are 13 frames potentially missing. This indicates a significant discrepancy, supporting the suspicion 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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Cost of Assistant vs. Loss from Theft:
- Hiring an assistant would cost: R3 500 * 12 = R42 000 per year.
- Potential loss due to 13 missing photo frames (assuming average price is R4 500 each) = 13 * R4 500 = R58 500.
- Conclusion: The assistant's salary is less than the potential losses, making it financially unwise.
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Insignificance of Missing Units:
- Of the total units, the 13 missing units represent a small fraction of the entire stock.
- If total stock is 750 units (example), the missing units are:
- Percentage: (13/750) * 100 = 1.73%. This percentage is minor and doesn't warrant hiring additional help.