COMRADES LTD Comrades Ltd sells sporting equipment - NSC Accounting - Question 2 - 2017 - Paper 1

Using the FIFO method, the cost of sales is calculated based on the order of stock coming in:

1. From June 2016:
   • 100 units at R330 = R33,000
2. From August 2016:
   • 90 units at R350 = R31,500
3. From November 2016:
   • 50 units at R345 = R17,250

Total cost of sales: $33,000 + 31,500 + 17,250 = R81,750$

The stock turnover rate can be calculated using the formula:

$\text{Stock Turnover Rate} = \frac{\text{Cost of Sales}}{\text{Average Stock}}$

Where,

• Cost of Sales = R81,750
• Average Stock = ( \frac{(Opening Stock + Closing Stock)}{2} )
• Opening Stock = 125 units
• Closing Stock = 96 units
• Average Stock = ( \frac{(125 + 96)}{2} \times (\text{Unit Price}) )

Calculating: $\text{Average Stock} = \frac{221}{2} = 110.5 \text{ (Average units)}$

Then, $\text{Stock Turnover Rate} \approx \frac{81750}{(110.5 \times \text{Average Selling Price})}$

To find the missing vests:

1. From the June 2016 delivery,
   • Expected = 298 units
   • Actual counted = 186 units
   • Missing = 298 - 186 = 112 units.

Value of missing vests: $112 \times R140 = R15,680$

To calculate Gross Profit:

1. Sales = 298 units at R140 = R41,720.
2. Cost of Sales includes:
   • Opening stock + Purchases = R13,760 + R33,740 + R17,670 = R65,170.
3. Gross Profit: $\text{Gross Profit} = \text{Sales} - \text{Cost of Sales} = R41,720 - R29,830 = R11,890$

1. Problem 1: Low Days Worked
   • Days worked: 172 out of 264 days (Low attendance).
   • Solution: Investigate employee attendance. Monitor opening/closing times and employee leave-taking.
2. Problem 2: Low Stock Turnover Rate
   • Stock turnover rate: 2 times (below average).
   • Solution: Implement better inventory management. Adjust pricing strategies or improve marketing efforts.