Photo AI
PACKER'S SUITCASE SHOP Charles Packer sells travel suitcases - NSC Accounting - Question 5 - 2018 - Paper 1
Question 5
PACKER'S SUITCASE SHOP Charles Packer sells travel suitcases. The year-end is 30 June 2018. REQUIRED: 5.2.1 Calculate the value of the closing stock on 30 June 20... show full transcript
Worked Solution & Example Answer:PACKER'S SUITCASE SHOP Charles Packer sells travel suitcases - NSC Accounting - Question 5 - 2018 - Paper 1
Step 1
Calculate the value of the closing stock on 30 June 2018 using the first-in-first-out (FIFO) method.
Answer
To calculate the value of the closing stock using the FIFO method, we start with the opening stock and purchases:
- Opening stock: 420 units at R2 175 each = R913 500
- Purchases:
- September 2017: 850 units at R2 250 each = R1 912 500
- December 2017: 980 units at R2 660 each = R2 613 800
- March 2018: 875 units at R2 563 each = R2 240 875
- June (from returns): 25 units at R3 040 each = R76 000
Total stock available = 420 + 850 + 980 + 875 + 25 = 3,150 units.
Since the closing stock is 496 units, we use the FIFO method to value it:
- The first 420 units will be valued at R2 175 each = R913,500.
- The remaining 76 units will be taken from the next purchase, December 2017: 76 units at R2 250 each = R171,000.
Therefore, the value of the closing stock = R913,500 + R171,000 = R1,084,500.
Step 2
Charles suspects that suitcases have been stolen. Provide a calculation to support his concern.
Answer
To support his concern, we can analyze the stock balances:
- Initial available stock: 3,150 units
- Closing stock: 496 units
- Stock sold: 3,050 units
If we compute:
Stock balance after sales: 3,150 units (initial) - 3,050 units (sold) = 100 units
This shows a discrepancy of units unaccounted for, leading to the suspicion of theft.
Step 3
Calculate for how long his closing stock is expected to last.
Answer
To calculate how long the closing stock will last, we use the formula:
[\text{Days of stock on hand} = \left( \frac{\text{Closing stock}}{\text{Daily sales}} \right) \times 365]
First, calculate daily sales:
- Sales on average: 3,050 suitcases sold in the period
Assuming a standard year with 365 days: [\text{Daily sales} = \frac{3,050}{365} \approx 8.36 \text{ suitcases per day}]
Now, substituting values: [\text{Days of stock on hand} = \left( \frac{496}{8.36} \right) \approx 59.5\text{ days}]
Thus, closing stock is expected to last approximately 59.5 days.
Step 4
State ONE problem with keeping too much stock on hand and ONE problem with keeping insufficient stock on hand.
Answer
One problem with keeping too much stock on hand is that it can become obsolete, leading to potential losses as the items may not sell.
On the other hand, keeping insufficient stock may lead to loss of income from sales, as customers may turn to competitors if the products are not available.