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4.1.1 Value of the closing stock Calculate the following on 28 February 2021, the financial year-end: 4.1.1 Value of the closing stock 4.1.2 Stock turnover rate INFORMATION: The following information relates to the running shoes - NSC Accounting - Question 4 - 2021 - Paper 2
Question 4
4.1.1 Value of the closing stock Calculate the following on 28 February 2021, the financial year-end: 4.1.1 Value of the closing stock 4.1.2 Stock turnover rate I... show full transcript
Worked Solution & Example Answer:4.1.1 Value of the closing stock Calculate the following on 28 February 2021, the financial year-end: 4.1.1 Value of the closing stock 4.1.2 Stock turnover rate INFORMATION: The following information relates to the running shoes - NSC Accounting - Question 4 - 2021 - Paper 2
Step 1
4.1.1 Value of the closing stock
Answer
To calculate the value of the closing stock on 28 February 2021, we will use the weighted-average method.
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Calculate Total Purchases:
Total Purchases = 2 490 + 560 + 420 + 810 = 4 280
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Calculate Total Cost of Purchases:
Total Cost = Total Number of Items Purchased × Average Cost + Carriage Costs
Total Cost = (560 × R820) + (420 × R900) + (810 × R950) + (R25 × 4 280)
Total Cost = R459 200 + R378 000 + R769 500 + R107 000 = R1 713 700
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Calculate Closing Stock:
The closing stock is determined as:
- Closing stock at end = Opening stock + Purchases - Sales
From A, we have 206 pairs on 1 March 2020.
Sales = 2 216 pairs
Therefore,
Closing Stock (pairs) = 206 (opening) + 4 280 (purchases) - 2 216 (sales)
Closing Stock (pairs) = 206 + 4 280 - 2 216 = 2 270 pairs
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Calculate Value of Closing Stock:
The value of the closing stock is given by
Value = Total Cost / Total Purchases × Closing Stock
Where: Total Cost = R1 713 700; Total Purchases = 4 280; Closing Stock = 2 270.
Value = (R1 713 700 / 4 280) × 2 270 = R 373 800
Therefore, the value of the closing stock on 28 February 2021 is R373 800.
Step 2
4.1.2 Stock turnover rate
Answer
To calculate the stock turnover rate, we use the formula:
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Calculate Cost of Goods Sold (COGS):
COGS can be calculated as:
COGS = Sales Value - Closing Stock Value.
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Total Sales Value = 2 216 × (R1 400 + R3 100) = 2 216 × R2 250 = R4 965 000.
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COGS = R4 965 000 - R373 800 = R4 591 200.
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Calculate Average Inventory:
Average Inventory = (Opening Stock + Closing Stock) / 2.
Average Inventory = (206 + 2 270) / 2 = 1 238 pairs
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Calculate Stock Turnover Rate:
Stock Turnover Rate =
Where Average Cost per Pair = R1 373.79
Therefore,
Stock Turnover Rate =
rac{4 591 200}{R1 373.79} ≈ 3.34 ext{ (times per year)}