INVENTORY VALUATION George Grande is the majority shareholder and CEO of Grande Ltd - NSC Accounting - Question 3 - 2019 - Paper 1

To calculate the percentage mark-up:

1. Understand the formula for percentage markup:

   ext{% Mark-up} = \left( \frac{\text{Selling Price} - \text{Cost Price}}{\text{Cost Price}} \right) \times 100

2. Substitute the values:

   • Selling Price = $3,480,000; Cost Price =$2,170,500.

yielding:

• \text{% Mark-up} = \left( \frac{3480000 - 2170500}{2170500} \right) \times 100 = 60.3\%.

To prove that the decision achieved its aims, we can present:

1. Increased Sales:

   • Sales increased from $3,375,000 to$3,480,000, a rise of $105,000, which is a 3.1% increase.

2. Customer Growth:

   • The number of customers increased from 26 to 37, reflecting an increase of 42%.

Points that might support the CEO's opinion include:

1. Increased Costs:

   • Cost of sales increased from $1,950,000 to$2,170,500, indicating a 11.30% hike in costs.

2. Reduced Sales Units:

   • Sales units sold dropped from 320 to 320, indicating a stagnant market despite increased discounts.

The stockholding period can be calculated using the stockholding formula:

1. Formula for Stockholding Period:

   $\text{Stockholding Period} = \left( \frac{\text{Average Inventory}}{\text{Cost of Goods Sold}} \right) \times 365$

2. Substitute the values:

   • Average Inventory = 59,625 units; Cost of Goods Sold = 930,375 units.
   • Stockholding Period = $\left( \frac{59,625}{265} \right) \times 365 \approx 23.4\text{ days}.$

To calculate missing lamps, we can use:

1. Determine the number of lamps sold without documentation:
   • Stock π Opening Stock - Closures = 600 - 265 - 3675 = 460 lamps are unaccounted.

Suggestions to address the issue include:

1. Implement Documentation Tracking:

   • Ensure every transaction has proper documentation to track stock accurately.

2. Regular Inventory Audits:

   • Schedule regular checks to maintain transparency and accountability in stock management.

To calculate the closing stock of TV sets:

1. Identify each TV's cost value:

   • LYN = $2,580,000; KYA =$3,888,000.

2. Closing stock calculation:

   • Total = $5,220,000 +$7,200 = $11,772,000.

Concerns regarding the situation may encompass:

1. Ethics of Commission Payments:

   • The conflict of interest arising from receiving commissions could harm trust with stakeholders.

2. Financial Integrity:

   • The extra cost may result in an inflated financial record that could mislead investors.

3. Potential Legal Issues:

   • Legal implications could arise from undisclosed financial arrangements impacting corporate governance standards.