SPEEDY CYCLES You are provided with information for the year ended 31 May 2018 - NSC Accounting - Question 3 - 2018 - Paper 1

To find the cost of sales for the year, we can use the opening stock, purchases, and closing stock:

• Opening stock = R59,500
• Purchases = R54,000
• Closing stock = R98,400

Using the formula:

$ext{Cost of Sales} = ext{Opening Stock} + ext{Purchases} - ext{Closing Stock}$

The cost of sales calculation:

$ext{Cost of Sales} = R59,500 + R54,000 - R98,400 = R15,100$

Therefore, the cost of sales for the year is R15,100.

Gross profit can be calculated by deducting the cost of sales from the total sales revenue:

• Total Sales Revenue = R185,420
• Cost of Sales = R15,100

The formula for gross profit is:

$ext{Gross Profit} = ext{Total Sales Revenue} - ext{Cost of Sales}$

Measuring gross profit:

$ext{Gross Profit} = R185,420 - R15,100 = R170,320$

Thus, the gross profit for the year is R170,320.

The selling price of a Ryder bicycle can be derived from the cost price. If Fred sells approximately 18 Cruze bicycles per month, we find:

• Cost Price of Ryder = R7,400, based on the details provided.
• To calculate the selling price, we must ensure it covers costs and achieves a desired markup, but we can establish:

$ext{Selling Price} = R7,400 + (R7,400 imes ext{markup percentage})$

Assuming a markup of 25%, we have the formula:

$ext{Selling Price} = R7,400 + (R7,400 imes 0.25) = R7,400 + R1,850 = R9,250$

Thus, the estimated selling price is R9,250.

To find how long it will take to sell the closing stock of Ryder bicycles, we determine the sales rate:

• Sales rate, assuming Fred sells approximately 18 bicycles per month, applied to Ryder sales conservatively:

If Ryder's stocks are at 421 units, then:

• The time required to sell all 421 units:

ext{Time} = rac{ ext{Ryder closing stock}}{ ext{number of Ryder sold per month}} = rac{421}{18} ext{ months} ext{ or approximately } 23.39 ext{ months}

So, it will take Fred approximately 23.39 months to sell the Ryder bicycles.

One possible reason for the slow sales of Ryder bicycles could be that customers are not satisfied with the new model or have mixed reviews about its performance. Many may not recognize the advantages over the Cruze model.

Advice: Fred should consider enhancing marketing efforts to promote the unique features of the Ryder bicycles to increase customer interest and sales.