AB SPORT SHOP André Brand is the owner of this business - NSC Accounting - Question 2 - 2017 - Paper 1

To find the value of the stock on hand, we first determine the total stock available for sale:

1. Total Purchases:

   • Add purchases:
     • $R4,302,500$ (Purchases)
     • $R110,400$ (Carriage on purchases)
     • Subtract returns: $R866.250$

   Thus:

   $\text{Net Purchases} = R4,302,500 + R110,400 - R866,250 = R4,412,900$

2. Total Value:

   • $R420,000$ (Opening Stock) + $R4,412,900$ (Net Purchases) = $R4,832,900$

3. Closing Stock Calculation:

   • Total units available for sale: $350 + 3,150 - 20 = 3,480$

   • Weighted Average:

     $\text{Average Price} = \frac{R4,832,900}{3,480} = R1,389.74$

4. Closing Stock Value:

   • For 465 units:
   • $\text{Value of Closing Stock} = 465 \times R1,389.74 = R646,300.10$

To compute gross profit, we use the formula:

$\text{Gross Profit} = \text{Sales} - \text{Cost of Goods Sold}$

Where:

• Total sales: $R5,400,000$
• COGS is calculated as:
• Opening stock $+ \text{Purchases} - \text{Closing Stock}$

Using the earlier results, we get:

• COGS = $R4,802,400$

Therefore:

$\text{Gross Profit} = R5,400,000 - R4,802,400 = R597,600$

To find how long it will take to sell the closing stock, we use:

$\text{Days} = \frac{\text{Closing Stock}}{\text{Average Daily Sales}} \times 365$

Assuming Average Daily Sales is calculated as:

• Daily Sales = Total Sales / Days in Period
• Total Sales = $R5,400,000$

Using a 365-day period:

$\text{Average Daily Sales} = \frac{R5,400,000}{365} = R14,786.30$

Then,

$\text{Days} = \frac{465 \times R1,389.74}{R14,786.30} \approx 56.3 \text{ days}$

To support André's concern, we can analyze the units:

• Opening Stock = 350
• Purchases = 3,150
• Returns = 20
• Closing Stock = 465

Calculating:

$\text{Calculated Units} = \text{Opening Stock} + \text{Purchases} - \text{Returns} - \text{Closing Stock} = 350 + 3,150 - 20 - 465 = 3,015$

Thus, we find 15 units missing.

How can André solve this problem?

• André can implement regular stock audits or install surveillance to enhance security and monitor stock levels.