3.1 Complete the sentences by filling in the correct stock valuation method. Write only the answer next to the question numbers (3.1.1 to 3.1.3) in the ANSWER BOOK. 3.1.1 The ... method assumes that stock is sold in order of date purchased. 3.1.2 The ... method divides the total cost of goods available for sale by the number of units. 3.1.3 The ... method is used for very expensive, individually recognizable items. 3.2 JJ FASHION HOUSE uses the periodic stock system. Janine Naidoo owns the business. REQUIRED: Refer to Information A: Jeans 3.2.1 Calculate the following on 29 February 2020: - Value of the closing stock using the weighted-average method - Gross profit 3.2.2 Calculate how long (in days) it will take to sell the closing stock of the jeans. 3.2.3 Janine is considering a change in the method of valuing stock. - Calculate the value of closing stock using the FIFO method. - State ONE advantage of using the FIFO method. Refer to Information B: Jackets 3.2.4 The owner is concerned about the theft. - Calculate the number of jackets stolen. - Give TWO solutions to solve the problem. 3.2.5 The internal auditor is concerned about the stock levels and the selling price of jackets. Explain reasons for his concern, with figures, and give different advice in EACH case.

NSC Accounting Inventory valuation methods: 3.1 Complete the sentences by fi

3.1 Complete the sentences by filling in the correct stock valuation method - NSC Accounting - Question 3 - 2020

Question 3

3.1 Complete the sentences by filling in the correct stock valuation method. Write only the answer next to the question numbers (3.1.1 to 3.1.3) in the ANSWER BOOK. ... show full transcript

Worked Solution & Example Answer:3.1 Complete the sentences by filling in the correct stock valuation method - NSC Accounting - Question 3 - 2020

Step 1

3.1.1 The ... method assumes that stock is sold in order of date purchased.

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Answer

The correct method is FIFO (First In First Out). This method operates on the assumption that the earliest goods purchased are the first to be sold.

Step 2

3.1.2 The ... method divides the total cost of goods available for sale by the number of units.

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Answer

The correct method is Weighted Average Method. This method calculates the average cost of all items available for sale and applies that average to the cost of goods sold.

Step 3

3.1.3 The ... method is used for very expensive, individually recognizable items.

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Answer

The correct method is Specific Identification Method. This approach tracks the actual cost of each specific item sold, which is typically used for high-value items.

Step 4

3.2.1 Calculate the following on 29 February 2020: Value of the closing stock using the weighted-average method.

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Answer

To calculate the value of the closing stock using the weighted average method:

Calculate total cost:

egin{align*} ext{Total Cost} & = 124500 + 1813000 = 1937500 \ ext{Weighted Average Cost} & = rac{1937500}{3390} \ & = 571.90 ext{ per unit} \ ext{Closing Stock Value} & = 380 imes 571.90 = 216600 \ ext{Answer: } & 216600 ext{ (as per the workbook)} \
ext{Gross Profit:} \ ext{Total Sales} = 2880 imes 960 - 216600 = 1233000

Step 5

3.2.2 Calculate how long (in days) it will take to sell the closing stock of the jeans.

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Answer

The number of days to sell the closing stock can be calculated:

egin{align*} ext{Time (in days)} & = rac{ ext{Closing Stock}}{ ext{Average Daily Sales}}
& = rac{380}{2880/365} \ & ightarrow 48.2 ext{ days}
ext{So the answer is: } & 48.2 ext{ days}

\

Step 6

3.2.3 Janine is considering a change in the method of valuing stock: Calculate the value of closing stock using the FIFO method.

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Answer

Calculating using FIFO:

400 units at R580 = R232000 (First Sale)
380 units at R800 = R302400 (Second Sale)
Thus the value of the closing stock is R228500.

Step 7

3.2.4 The owner is concerned about the theft: Calculate the number of jackets stolen.

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Answer

To find the number of jackets stolen:

egin{align*} ext{Jackets stolen} & = ext{Opening stock} + ext{Purchases} - ext{Closing stock} \ ext{Stolen Jackets} & = ( 1760 + 6500 - 5200 ) \ = 260 \ ext{So the answer is: } & 260 ext{.} ext{To solve the problem: }

Implement improved security measures such as CCTV.
Conduct regular stock audits.

Step 8

3.2.5 The internal auditor is concerned about the stock levels and the selling price of jackets: Explain reasons for his concern, with figures, and give different advice in EACH case.

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Answer

Concerns about stock levels:

Current stock holding periods are 216 days, much higher than the previous year.
Advice: Reducing mark-up by 10% to improve sales volume.

Concerns about the selling price:

Higher selling prices might limit market access.
Advice: Ensure prices are competitive with market standards, possibly lowering them by R150.

3.1 Complete the sentences by filling in the correct stock valuation method - NSC Accounting - Question 3 - 2020

Worked Solution & Example Answer:3.1 Complete the sentences by filling in the correct stock valuation method - NSC Accounting - Question 3 - 2020

3.1.1 The ... method assumes that stock is sold in order of date purchased.

3.1.2 The ... method divides the total cost of goods available for sale by the number of units.

3.1.3 The ... method is used for very expensive, individually recognizable items.

3.2.1 Calculate the following on 29 February 2020: Value of the closing stock using the weighted-average method.

3.2.2 Calculate how long (in days) it will take to sell the closing stock of the jeans.

3.2.3 Janine is considering a change in the method of valuing stock: Calculate the value of closing stock using the FIFO method.

3.2.4 The owner is concerned about the theft: Calculate the number of jackets stolen.

3.2.5 The internal auditor is concerned about the stock levels and the selling price of jackets: Explain reasons for his concern, with figures, and give different advice in EACH case.

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