3.1 Complete the sentences by filling in the correct stock valuation method - NSC Accounting - Question 3 - 2020

The correct answer is Weighted Average Method.

The correct answer is Specific Identification Method.

To calculate the weighted-average closing stock:

1. Total Cost = Opening Stock + Purchases - Returns = 1,937,500 + 1,813,000 - 79,300 = 3,671,200.
2. Units Available = 3,390 - 130 = 3,260.

Closing Stock = rac{3,671,200}{3,260} = 216,600.

Gross Profit = Selling Price - Cost of Goods Sold = 2,764,800 - 1,937,500 = 1,123,300.

To calculate the number of days to sell the closing stock:

1. Days to sell = rac{Closing Stock}{Daily Sales} imes 365
2. If using units: rac{380}{2,880} imes 365 = 48.2 ext{ days}.

Using the FIFO method, calculate as follows:

• First 270 units at R400 (270 units)
• Then 110 units at R580 (110 units)
• Finally, 70 units at R580 (70 units)

Total = R164,700 + R63,800 + R22,500 = R228,500.

One advantage of the FIFO method is that it often results in a lower cost of goods sold during periods of inflation, leading to higher reported profits.

To calculate the number of jackets stolen:

Stolen = Opening Stock + Purchases - Closing Stock = 1,760 + 6,500 - 1,920 = 260 jackets.

1. Implement a security system such as CCTV to monitor stock areas.
2. Train staff in stock management and auditing procedures.

Concerns could include:

• Stock Levels: High stock levels may lead to increased holding costs and potential obsolescence. Advise to streamline inventory.
• Selling Price: If prices are too low, it impacts profitability. Advise regular market analysis to adjust pricing strategies in line with competitors.