2020 SASS 3N POA EOY P2 Q3
3 Christopher is a young graduate who started an online business selling gifts. He is looking at selling wireless earphones as one of his gift items for Christmas. Due to limited funds, he has to decide between Jbuds or Air Pod.
The following information is available.
Jbuds | Air Pod | |
Price | $50 per unit Gross profit is estimated to be $10 per unit. | $250 per unit Gross profit is estimated to be $35 per unit |
|
| |
Warranty (by manufacturers) | 6 months | 1 year |
Popular with working adults | Popular with youths |
REQUIRED
a. Advise Christopher which wireless earphone he should choose. Justify your decision with two reasons.
[5]
Christopher’s family owns ACE Computer, a retailer of laptops. The business uses the FIFO (First In First Out) method of inventory valuation. On 28 February 2020, the business had 120 ACE laptops costing $800 per unit.
The following transactions took place during March 2020.
Inventory purchases
Date | Number of laptops | Cost per unit |
Mar 4 | 50 | $820 |
8 | 50 | $800 |
10 | 100 | $850 |
18 | 200 | $900 |
23 | 180 | $920 |
25 | 50 | $950 |
Inventory sold
Date | Number of laptops | Selling Price per unit |
Mar 12 | 170 | $1 500 |
15 | 150 | $1 750 |
28 | 380 | $1 800 |
REQUIRED
b. Calculate the total cost of sales for March 2020. Show your workings clearly.
[3]
c. Calculate the value of inventory at 31 March 2020.
[1]
After the valuation on 31 March 2020, it was discovered that the batch of laptops purchased on 25 March 2020 needed to be upgraded in order to be sold. The net realisable value of these laptops was agreed to be $750 per laptop
REQUIRED
d. State the basis for valuation of inventory.
[1]
e. Calculate the revised value of inventory at 31 March 2020.
[1]
f. State the accounting theory which is applied when valuing inventory.
[1]
ACE Computer ordered a shipment of computer accessories on credit. The following costs relate to this batch of computer accessories.
REQUIRED
g. Calculate the cost of computer accessories purchased
[2]
[TOTAL 14]
A Decision which is supported by reasons[1]
Maximum of 2 reasons to support their decision. Each reason should comprise of
1 basic statement for 1 mark which is then developed for an additional 1 mark
Total 4 marks for discussing 2 reasons.
Example of basic statements and development Decision: sell air pod
Gross profit for selling air pod is $35 per unit which is higher than Jbud of $10. (1 basic statement)
The business will make a higher profit of $25 per unit from selling air pod than selling Jbuds,
(1 development)
sweat & water resistant, with Hey Siri (basic statement). These features will be suitable for youths who
are usually active and tech savy (development)
1 year warranty (basic statement). The warranty is 6 months more than Jbuds and customers
will appreciate this after sales service. (development)
| no of laptop | unit cost | total cost |
| 120 | 800 | $96,000 |
| 50 | 820 | $41,000 |
| 50 | 800 | $40,000 |
| 100 | 850 | $85,000 |
| 200 | 900 | $180,000 |
| 180 | 920 | $165,600 |
| $607,600 |
50 x $950 = $47500
Inventory is valued at the lower of cost and net realisable value.
50x$750=$37500
9800+300+100+150 = $10 350