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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
Explain whether Sipho should be concerned about the stockholding periods of the two models. Use figures. Give possible reasons for the difference in the holding periods of the two models.
Answer
Sipho should be concerned about the stockholding periods for both models. The holding period for Hawi is 152.1 days, which is considerably longer than the 55.2 days for Yama.
Possible reasons for the difference include:
- Demand: Yama may be in higher demand due to its advanced features, while Hawi may be slow-moving.
- Price: Hawi is cheaper, making it attractive but possibly less desirable in terms of features compared to Yama.
- Return Rate: Hawi may have a higher return rate, indicating customer dissatisfaction, leading to longer holding periods.
In conclusion, Sipho should analyze the market trends and possibly reconsider the stock strategy for Hawi to avoid excessive holding time.
Step 2
Step 3
Calculate the trade-in value received on the vehicle disposed of on 1 June 2022.
Answer
To calculate the trade-in value for the vehicle disposed on 1 June 2022:
- Original cost price of the vehicle = R180 000
- Accumulated depreciation after one year at 20% = R180 000 * 20% = R36 000
- Therefore, trade-in value = R180 000 - R36 000 = R144 000.
Step 4
Explain to the bookkeeper why his method is incorrect and provide a calculation to support your explanation.
Answer
The bookkeeper's method is incorrect as he applied the straight-line method to a vehicle that should be depreciated using a diminishing balance method. This can lead to inaccurate assessments of the asset value.
Supporting Calculation: If the vehicle's cost is R930 000 and the allowable depreciation for two years under the diminishing balance method (20% p.a.) is:
1st year: R930 000 * 20% = R186 000.
2nd year: (R930 000 - R186 000) * 20% = R149 200.
Total depreciation: R186 000 + R149 200 = R335 200.
Step 5
Explain TWO possible arguments that the CEO can use to support his decision.
Answer
- Community Support: Donating computers to a local school will improve the company's image and show corporate social responsibility, fostering goodwill within the community.
- Tax Benefits: The donation of old computers may provide tax benefits to the company, as contributions to educational institutions often qualify for deductions.