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5.1 CONCEPTS Choose the correct word(s) from those given in brackets - NSC Accounting - Question 5 - 2017 - Paper 1
Question 5
5.1 CONCEPTS Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question number (5.1.1–5.1.4) in the ANSWER BOOK. 5.1.1 Th... show full transcript
Worked Solution & Example Answer:5.1 CONCEPTS Choose the correct word(s) from those given in brackets - NSC Accounting - Question 5 - 2017 - Paper 1
Step 1
5.2.1 Calculate the value of the closing stock on 30 September 2017 using the specific identification method.
Answer
To calculate the closing stock using the specific identification method, we need to take into account the stock obtained during the period:
- Starting stock: 243,000
- Acquired: 109,600
- Acquired: 252,800
Then, calculate the costs:
Closing Stock (CS) = Starting Stock (OS) + Purchases (P) - Cost of Sales (COS)
declining last 15 units sold includes:
- 18 units at 10 = 243,000
- 4 units at 27,400 = 109,600
- 8 units at 25,280 = 252,800
Thus, closing stock equals:
CS = 291,600 + 1,125 + 605,400
The final value of closing stock at 30 September 2017 is 605,400.
Step 2
5.2.2 Mike requires your advice on the three different models of motorbikes in which he is trading. Explain TWO points of advice.
Answer
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Reduce the price of Model AO2 to increase sales: Lowering the price may help in reducing stock levels, thus enhancing cash flow and the overall inventory turnover.
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Consider discontinuing Model AO2: Evaluating sales performance can show that the AO2 model is less popular, allowing you to focus on more profitable models instead.
Step 3
5.2.3 Calculate the value of the closing stock on 30 September 2017 using the weighted-average method.
Answer
To calculate the closing stock using the weighted-average method, the average cost per unit needs to be determined:
Total Cost of Stock Available = 517,675 / Total Units = 621
Thus, the calculation follows:
CS = units left × unit cost = (15,000 + 9,300) e.g. 126.75 x (12 / 2 or 6)
This results in a closing stock value of 6,201.
Step 4
5.2.4 Is the weighted-average method appropriate to value the helmets? Explain ONE point.
Answer
Yes, the weighted-average method is appropriate due to:
- Similarity in Value: The items are of similar values, making it suitable to use an average rather than differentiating between each individual item's cost.
Step 5
5.2.5 Mike suspects that helmets are being stolen from the shop despite security cameras being installed. Provide a calculation to verify his suspicion.
Answer
Calculation:
If 30 helmets – 75 returned = 5 missing helmets.
From a potential theft of:
- 12% or 85 helmets = 3 helmets missing.
Thus, the suspicion can be verified.
Improvement Points:
- Conduct regular physical stock counts.
- Improve the utilization of security tags on products.
- Train staff on inventory control measures effectively.