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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. Use the specific identification method.
Answer
To calculate the value of the closing stock, we use the information from the stock records.
-
For Hawi:
- Units Sold = 300
- Purchased = 90 + 340 + 125
- Remaining = 90 + 340 + 125 - 300 = 255 (units)
- Cost per unit = R3,800
- Total for Hawi = 255 x R3,800 = R969,900
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For Yama:
- Units Sold = 430
- Remaining = 495 - 430 = 65 (units)
- Cost per unit = R5,410
- Total for Yama = 65 x R5,410 = R351,650
The total closing stock value: R969,900 + R351,650 = R1,321,550.
Step 2
4.2.2 Calculate how long (in days) it will take to sell the closing stock of the Hawi printers.
Answer
Using the formula:
ext{Holding Period} = rac{ ext{Closing Stock}}{ ext{Average Daily Sales}}
Here, Average Daily Sales for Hawi:
- Units Sold = 300
- Stock Holding Period = 151.2 days
The calculation is:
ext{Days to Sell Hawi} = rac{255}{ rac{300}{151.2}}
This yields approximately 127 days for the remaining stock of Hawi.
Step 3
4.2.3 Explain whether Sipho should be concerned about the stockholding periods of the two models.
Answer
Sipho should be concerned about the stockholding periods.
- Hawi has a much longer stockholding period of 152.1 days, indicating slow sales and possible obsolescence. This could lead to increased carrying costs or potential losses if the stock becomes outdated.
- Yama, however, sells more quickly with a holding period of only 55.2 days, indicating strong demand.
This discrepancy suggests Hawi may need marketing strategies or pricing adjustments to improve its sales performance.
Step 4
Step 5
4.3.2 Explain to the bookkeeper why his method is incorrect and provide a calculation to support your explanation.
Answer
The bookkeeper's method is incorrect because the asset is almost fully depreciated. The R75,000 cannot be recognized as it would lead to a negative carrying value.
Calculation of Accumulated Depreciation:
If the cost was R300,000 and the vehicle is disposed, the calculated depreciation should not allow any carrying value below R1,000:
Step 6
4.3.3 Explain TWO possible arguments that the CEO can use to support his decision.
Answer
- Donating the computers can enhance the company's image in the community, which can improve goodwill and possible customer relations.
- It provides an opportunity to be involved in corporate social responsibility (CSR), demonstrating a commitment to education and community development.