4.1 Choose the correct word(s) from those given in brackets - NSC Accounting - Question 4 - 2021 - Paper 2

To calculate the cost of sales, we can follow this formula:

$Cost\;of\;Sales = Opening\;Stock + Purchases - Closing\;Stock$

1. First, substitute the values:

   • Opening Stock = 68,120
   • Purchases = 272,450
   • Closing Stock = 69,340

2. Calculate:

   • Cost of Sales = 68,120 + 272,450 - 69,340
   • Cost of Sales = 271,230

Hence, the Cost of sales is R267,530.

The average stockholding period can be calculated using:

$Stockholding\;Period = \frac{Average\;Stock}{Cost\;of\;Sales} \times 365$

1. Here, the Average Stock can be calculated as:

   • Average Stock = \frac{Opening;Stock + Closing;Stock}{2} = \frac{68,120 + 69,340}{2} = 68,730

2. Now, use the values:

   • Average Stock = 68,730
   • Cost of Sales = 267,530

3. Substitute into the formula:

   • Stockholding Period = \frac{68,730}{267,530} \times 365 = 93.48 days

Thus, the average stockholding period is approximately 93.5 days.

1. Not Satisfied Option: The stockholding period has increased significantly from 52 days to 93.5 days. This indicates that stock is not moving as quickly as expected, leading to potential wastage and increased storage costs.

2. Market Situation: Gwen may also face challenges in selling bags if the demand decreases, which could raise the risk of stock becoming obsolete.

Gwen should implement strategies to improve stock turnover.