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4.1 Choose the correct cost concepts from those given in brackets - NSC Accounting - Question 4 - 2023 - Paper 2
Question 4
4.1 Choose the correct cost concepts from those given in brackets. Write only the word(s) next to the question numbers (4.1.1 to 4.1.3) in the ANSWER BOOK. 4.1.1 Th... show full transcript
Worked Solution & Example Answer:4.1 Choose the correct cost concepts from those given in brackets - NSC Accounting - Question 4 - 2023 - Paper 2
Step 1
4.2.1 Calculate the value of the closing stock on 28 February 2023. Use the specific identification method.
Answer
To calculate the closing stock, we will use the specific identification method by identifying the relevant quantities for each model:
For Hawi:
- Units sold: 300
- Units remaining: 90 (opening) + 835 (purchased) - 300 (sold) = 625
- Cost of remaining stock: 625 units will consist of:
- 90 units from opening stock at R3,800 each = R342,000
- 340 units from purchases at R3,800 each = R1,292,000
- So, total value = R342,000 + R1,292,000 = R1,634,000
For Yama:
- Units sold: 430
- Units remaining: 495 (opening) + 496 (purchased) - 430 (sold) = 561
- Cost of remaining stock:
- 496 units from purchases at R5,410 each = R2,677,950
Therefore, the closing stock value, when added together is:
Total Closing Stock = R1,634,000 + R2,677,950 = R4,311,950 or R864,950 when correctly adjusted for the specific stock sold.
Step 2
4.2.2 Calculate how long (in days) it will take to sell the closing stock of the Hawi printers.
Answer
To determine how long it will take to sell the closing stock of the Hawi printers, we calculate:
- Current stock of Hawi printers = 625 units (as calculated previously).
- Daily sales = Units sold / Days = 300 / 365 = 0.82 units/day.
Thus, days to sell remaining stock:
days = Total units / Daily sales = 625 / 0.82;
This results in approximately 761 days.
Step 3
4.2.3 Explain whether Sipho should be concerned about the stockholding periods of the Hawi and Yama printers. Support figures. Give possible reasons for the difference in the holding periods of the two models.
Answer
Sipho should be concerned about the stockholding periods of the Hawi and Yama printers.
- Hawi has a stockholding period of 152.1 days, which is significantly long compared to Yama at 55.2 days. This indicates that Hawi is slow-moving stock.
- Possible reasons could include:
- Hawi may be less in demand due to higher costs compared to Yama or may have slower sale rates.
- Yama tends to require less than two months to sell, likely due to better quality or features.
The high stockholding period for Hawi may lead to increased holding costs and potential for obsolescence.
Step 4
Step 5
4.3.2 Explain to the bookkeeper why his method is incorrect.
Answer
The bookkeeper's method is incorrect because he calculated depreciation on the full cost without considering the accumulated depreciation on the vehicles.
Calculation: Accumulated Depreciation = R275,000 (previous year) Total Depreciation on Vehicles = R300,000 - R262,500 = R37,500 should be adjusted.
Step 6
4.3.3 Explain TWO possible arguments that the CEO can use to support his decision.
Answer
- Community Support: Donating old computers to a local school enhances the company's community involvement, demonstrating corporate social responsibility, and can improve the public image.
- Employee Morale: Supporting local education can lead to a positive perception of the company, potentially boosting employee morale and aiding recruitment efforts.