AB SPORT SHOP André Brand is the owner of this business - NSC Accounting - Question 2 - 2017 - Paper 1

To calculate the value of stock on hand using the weighted-average method, we first determine the net purchases:

Net Purchases = Purchases + Carriage - Returns

Total Purchases: R4 302 500 Carriage: R110 400 Returns: R886 250

Calculating:

$ext{Net Purchases} = R4 302 500 + R110 400 - R886 250 = R4 526 650$

Now, we find the average cost per unit:

$ext{Average Cost} = \frac{\text{Total Value}}{\text{Total Units}} \text{ and for the total units: } 350 + 3150 - 20 = 3480$

Thus,

$ext{Average Cost} = \frac{4 526 650}{3480} = R1300$

Finally, multiply by the closing stock:

$ext{Value of Closing Stock} = R1300 \times 465 = R641 700$

Gross Profit can be calculated using the formula:

$ext{Gross Profit} = ext{Sales} - ext{Cost of Goods Sold (COGS)}$

Sales = R5 400 000 COGS = Total Value - Value of Closing Stock

Thus,

COGS = R4 802 400

Calculating Gross Profit:

$ext{Gross Profit} = R5 400 000 - R4 802 400 = R597 600$

To find the number of days to sell the closing stock, we use:

$ext{Days to Sell} = \frac{ ext{Closing Stock}}{ ext{Sales per Day}}$

Where Sales per Day can be calculated as:

Sales per Day = Total Sales / 365 days = R5 400 000 / 365

Finally, substituting back:

$ext{Days} = \frac{465}{R5 400 / 365} \text{ which simplifies to } 56.3 ext{ days.}$

To support André's concern:

We can evaluate discrepancies between expected versus actual counts:

Expected Stock = 350 (opening) + 3150 (purchases) - 20 (returns) = 3480

Actual Stock on hand = 465 at closing

Discrepancy = Expected Stock - Actual Stock Discrepancy = 3480 - 465 = 3015 faulty units.

This indicates mismanagement or possible theft.

To address this issue, André may opt for better monitoring practices.

André can establish regular stock counts combined with implementing security measures. For instance, he might conduct inventory audits more frequently or install security cameras to monitor stock movements and deter theft.