2020 SASS 3N POA EOY P2 Q3

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 

Nature of product 

  • Universal fit 
  • Compatible with android and apple phones
  • Noise cancellation 
  • Up to 5 hours of listening time on one charge 
  • More than 24 hours of listening time with charging case. 
  • Customised fit
  • Compatible with apple phones
  • Noise cancellation 
  • Sweat and water resistant 
  • “Hey Siri” always on 
  • Up to 4 hours of listening time on one charge 
  • More than 20 hours of listening time with charging case 

Warranty (by manufacturers)

6 months 

1 year 

Customer preference 

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.

 

$

Cost of accessories 

9 800

Freight charges 

300

Insurance for shipment 

100

Import tax

150

Wages for salesperson to sell accessories

900

REQUIRED

g. Calculate the cost of computer accessories purchased

[2]

[TOTAL 14]

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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 laptopunit costtotal cost
120800$96,000
50820$41,000
50800$40,000
100850$85,000
200900$180,000
180920$165,600
  $607,600

50 x $950 = $47500

Inventory is valued at the lower of cost and net realisable value.

50x$750=$37500

Prudence theory

9800+300+100+150 = $10 350

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