FA 1 - MARK CASE STUDY: TOPIC 5 CASE STUDY 5 - INVENTORIES While Paul has been busy organising his key assets and making sure the TVA is running the way he wants, Jim has decided to focus on the products sold by Energising Athletes Making the Leap. Jim as been looking into Paul's approach to recording inventory and has noticed it has been reasonably haphazard. Given Energising Athletes Making the Leap has only ever sold a few different items Paul appears to simply buy stock when he needs it and then occasionally counts what stock is on hand to see if he needs to buy more. Required 1 Given the information above, what type of inventory recording system does it appear Paul is using (sort of). Outline for Jim the two alternative recording systems and what Paul should be considering when choosing between them. FA 1 - MARK CASE STUDY: TOPICS FA1-MARK CASE STUDY: TOPICS Jim thinks there is an opportunity to improve this system and give Paul better information about his stock movements but wants your assistance before talking to Paul. In order to show Paul how he could change things Jim has gathered the following information about two products Energising Athletes Making the Leap sells, Wrist Tape and a relative new product Paul's Ultimate Pole, and what has been bought and sold in the past month. Jim is quite confused with calculations you've done for the Wrist Tape and would like to keep things much simpler. He knows there is method where you simply assume you sell your old stock first and asked if you can use that method when doing any calculations for Paul's Ultimate Pole. Product 1 - Wrist Tape is a 2-metre-long role of tape used by jumpers to support their wrist and help grip the pole when jumping. Each roll of tape sells for $12 and a count at the start of June showed 30 rolls on hand with a total cost of $120. Product 2 - Paul's Ultimate Pole is a special designed Pole Vault pole that Paul has recently begun selling. Paul contributed to the design of the pole and is quite proud of the product but given its size 5 metres long and cost, each pole sells for $650 dollars, he only keeps a few poles on hand. At the start of June Paul only had 2 poles in stock at a cost of $250 each. Date June 6 8 10 17 21 25 26 Date Purchases Sales June 2 40 rolls @ $4.10 per roll 5 20 rolls 7 50 rolls @ $4.00 per roll 11 30 rolls 1 15 rolls 17 Customer returned 5 rolls as they over ordered 19 60 rolls @ $4.05 23 10 rolls 26 40 rolls 28 Returned 10 rolls to supplier that were purchased on June 7 due to a manufacturing fault 29 25 rolls 30 30 rolls @ $2.10 (Paul was able to purchase these cheaply as the supplier was holding a stock take sale) A stocktake on June 30 revealed Paul had 60 rolls of Wrist Tape on hand Purchases Sales 2 poles 4 poles @ $250 1 pole 2 poles a $260 3 poles 4 poles a $242 Returned 2 poles purchased on June 25 as they were damaged when being delivered. 1 pole A stocktake on June 30 revealed Paul had 3 poles in stock 29 Required 3 Calculate the COGS and Gross Profit for the Paul's Ultimate Pole using a periodic recording system and the FIFO valuation method. Required 2 Calculate the COGS and Gross Profit for the Wrist Tape assuming Paul uses a periodic recording system and values the tape using weighted average cost. FA 1 - MARK CASE STUDY: TOPIC 5 CASE STUDY 5 - INVENTORIES While Paul has been busy organising his key assets and making sure the TVA is running the way he wants, Jim has decided to focus on the products sold by Energising Athletes Making the Leap. Jim as been looking into Paul's approach to recording inventory and has noticed it has been reasonably haphazard. Given Energising Athletes Making the Leap has only ever sold a few different items Paul appears to simply buy stock when he needs it and then occasionally counts what stock is on hand to see if he needs to buy more. Required 1 Given the information above, what type of inventory recording system does it appear Paul is using (sort of). Outline for Jim the two alternative recording systems and what Paul should be considering when choosing between them. FA 1 - MARK CASE STUDY: TOPICS FA1-MARK CASE STUDY: TOPICS Jim thinks there is an opportunity to improve this system and give Paul better information about his stock movements but wants your assistance before talking to Paul. In order to show Paul how he could change things Jim has gathered the following information about two products Energising Athletes Making the Leap sells, Wrist Tape and a relative new product Paul's Ultimate Pole, and what has been bought and sold in the past month. Jim is quite confused with calculations you've done for the Wrist Tape and would like to keep things much simpler. He knows there is method where you simply assume you sell your old stock first and asked if you can use that method when doing any calculations for Paul's Ultimate Pole. Product 1 - Wrist Tape is a 2-metre-long role of tape used by jumpers to support their wrist and help grip the pole when jumping. Each roll of tape sells for $12 and a count at the start of June showed 30 rolls on hand with a total cost of $120. Product 2 - Paul's Ultimate Pole is a special designed Pole Vault pole that Paul has recently begun selling. Paul contributed to the design of the pole and is quite proud of the product but given its size 5 metres long and cost, each pole sells for $650 dollars, he only keeps a few poles on hand. At the start of June Paul only had 2 poles in stock at a cost of $250 each. Date June 6 8 10 17 21 25 26 Date Purchases Sales June 2 40 rolls @ $4.10 per roll 5 20 rolls 7 50 rolls @ $4.00 per roll 11 30 rolls 1 15 rolls 17 Customer returned 5 rolls as they over ordered 19 60 rolls @ $4.05 23 10 rolls 26 40 rolls 28 Returned 10 rolls to supplier that were purchased on June 7 due to a manufacturing fault 29 25 rolls 30 30 rolls @ $2.10 (Paul was able to purchase these cheaply as the supplier was holding a stock take sale) A stocktake on June 30 revealed Paul had 60 rolls of Wrist Tape on hand Purchases Sales 2 poles 4 poles @ $250 1 pole 2 poles a $260 3 poles 4 poles a $242 Returned 2 poles purchased on June 25 as they were damaged when being delivered. 1 pole A stocktake on June 30 revealed Paul had 3 poles in stock 29 Required 3 Calculate the COGS and Gross Profit for the Paul's Ultimate Pole using a periodic recording system and the FIFO valuation method. Required 2 Calculate the COGS and Gross Profit for the Wrist Tape assuming Paul uses a periodic recording system and values the tape using weighted average cost