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4.1 Choose the correct cost concepts from those given in brackets - NSC Accounting - Question 4 - 2023 - Paper 2
Question 4
4.1 Choose the correct cost concepts from those given in brackets. Write only the word(s) next to the question numbers (4.1.1 to 4.1.3) in the ANSWER BOOK. 4.1.1 Th... show full transcript
Worked Solution & Example Answer:4.1 Choose the correct cost concepts from those given in brackets - NSC Accounting - Question 4 - 2023 - Paper 2
Step 1
4.2.1 Calculate the value of the closing stock on 28 February 2023.
Answer
To calculate the value of the closing stock on 28 February 2023, we will use the specific identification method. The closing stock comprises the remaining units of Hawi and Yama.
For Hawi:
- Units purchased: 340
- Units sold: 300
Closing stock of Hawi = Units purchased - Units sold = 340 - 300 = 40 units
Cost of Hawi remaining:
Cost per unit for Hawi = R3,800
Value of Hawi closing stock = 40 units * R3,800 = R152,000
For Yama:
- Units purchased: 495
- Units sold: 430
Closing stock of Yama = 495 - 430 = 65 units
Cost of Yama remaining:
Cost per unit for Yama = R5,410
Value of Yama closing stock = 65 units * R5,410 = R351,650
Therefore, the total value of the closing stock = Value of Hawi + Value of Yama = R152,000 + R351,650 = R503,650.
Step 2
4.2.2 Calculate how long (in days) it will take to sell the closing stock of the Hawi printers.
Answer
To calculate how long (in days) it will take to sell the closing stock of the Hawi printers, we will use the following formula:
Time (in days) = (Closing stock units / Monthly sales units) * 30.
- Closing stock of Hawi: 40 units
- Monthly sales of Hawi are calculated as follows:
Total units sold: 300 Time period (in days) = 30 (assuming it is for the month)
Monthly sales = Total units sold / Time period = 300 / 30 = 10 units per day.
Time to sell closing stock = (40 / 10) * 30 = 120 days.
Step 3
4.2.3 Explain whether Sipho should be concerned about the stockholding periods of the Hawi and Yama printers.
Answer
Sipho should be concerned about the stockholding periods of the Hawi and Yama printers due to the difference in how long it takes to sell each model:
- Hawi: The stockholding period is 152.1 days. This indicates slower movement which could be classified as poor sales or overstock.
- Yama: The stockholding period is 55.2 days. This model sells much faster, indicating higher demand and better market acceptance.
Possible concerns for the Hawi model include:
- Possible obsolescence, as slow-moving stock may not meet current market needs.
- Higher carrying costs associated with overstocking unsold items, leading to reduced profit margins.
Step 4
4.3.1 Calculate the cost price of vehicles on 1 March 2022.
Answer
To calculate the cost price of vehicles on 1 March 2022, we need to consider the available information:
- Balances: Vehicles: R930,000 Trade-in value: R260,000
Then the cost price is given by:
Cost Price = Balances of Vehicles - Trade-in value = R930,000 - R260,000 = R670,000.
Step 5
4.3.2 Explain to the bookkeeper why his method is incorrect.
Answer
The bookkeeper's method is incorrect because he applied the depreciation calculation using an approximate value without considering that the asset (computers) would have been almost fully depreciated.
The formula he used is:
Depreciation = Cost x Rate = R300,000 x 25%.
However, the appropriate calculation should account for reduced value and potential impairment, especially for fully depreciated assets. This could lead to negative equity.
To support this, the calculation would show that after depreciation, the remaining value cannot justify a full expense claim of R75,000; rather it remains at R1,000.
Step 6
4.3.3 Explain TWO possible arguments that the CEO can use to support his decision.
Answer
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Community support and CSR: Donating the computers enhances the company's image and demonstrates corporate social responsibility (CSR). This action shows that the company cares about the local community and education, which may lead to improved public relations.
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Employee morale and social impact: Supporting local schools aligns the company's values with social contributions, which can boost employee morale as staff appreciate being part of a socially responsible organization, potentially leading to higher employee retention and positive work environment.