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in Grade 12 by Master (810k points)

Bamjee Stores sells two types of men's watches

  • Johx, imported from Germany
  • Kwatz, locally manufactured

REQUIRED:

A. Calculate the following in respect of Johx watches on 31 August 2015:

  1.  Closing stock
  2. Cost of sales
  3. Average stock-holding period (in days)

B. Calculate the following values (in rands) in respect of Kwatz watches on 31 August 2015:

  1. Closing Stock
  2. Sales 

 C. Explain why the business uses different methods to value each type of watch.

INFORMATION:        
A.  The business uses the following methods to value the stock of watches:

  • Johx – specific identification 
  • Kwatz – weighted average

No watches were stolen or lost during the financial year.

B.

Information relating to Johx watches
UNITS UNIT
PRICE
TOTAL
AMOUNT
UNITS
SOD
TOTAL
SALES
Opening Stock 12 R6 500 R78 000 11 R125 125
Purchases: 35  R252 000
Sept 2014 15 R6 800 R102 000 10 R119 000
Jan 2015 12 R7 300 R87 600 10 R127 750
Apr 2015 8 R7 800 R62 400 5 R68 250
47 R330 000 36 R440 125
  • The cost price of Johx watches includes transport costs and customs duties.
  •  These watches are sold at a mark-up of 75% on cost.

C.

Information relating to Kwatz watches
UNITS UNIT
PRICE
TOTAL
SALES
Opening Stock 95 R340 R32 300
Purchases: 675 R259 900
Sept 2014 320 R375 R120 000
Jan 2015 210 R390 R81 900
Apr 2015 145 R400 R58 000
  • Kwatz watches are sold at a fixed selling price of R520 each. 
  • Cost to transport Kwatz watches from local suppliers amounted to R11 950 for the financial year and is not included in the figures above. 
  • There were 92 Kwatz watches in stock on 31 August 2015.   

1 Answer

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by Master (810k points)
 
Best answer

A.1. Calculate the closing stock of Johx watches on  31 August 2015.

1 x 6 500=6 500   5 x 6 800=34 000  2 x 7 300=+3 x 7 800=23 400
6 500+34 000+14 600+23 400=78 500.

A.2. Calculate the cost of sales of Johx watches for the year ended  31 August 2015.
330 000

71 500  (11 x 6 500)
68 000  (10 x 6 800)
73 000  (10 x 7 300)
39 000  (05 x 7 800)
=251 500 
OR
440 125 x 100/175 = 251 500.


 A.3. Calculate the average stock-holding period (in days) of Johx  watches on 31 August 2015.

78 250
½ (78 000+78 50)  x 365  = 113,6 days
          251 500  

B.1. Calculate the closing stock of Kwatz watches for the year ended  31 August 2015.

32 300+259 900+11 950 / 95+675 = 395
 395 x 92 = 36 340.

B.2. Calculate the sales of Kwatz watches on 31 August 2015.

(770 – 92) = 678 (units sold)
678 x R520 = 352 560

C.  The business uses different methods to value each type of watch.

  •  Johx is sold at a high value. Small quantities are purchased.
  • Each item can be monitored individually.  
  • The value is continuously changing. 

Kwatz is sold at a low value.  Large quantities are purchased. The value of each watch is almost constant.     

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