QUESTION 1 (30 MARKS) (36 MINUTES)

INDEPENDENT PART A You have been presented with information by the management accountant of Mzanzifashion (Pty) Ltd (Mzanzi-fashion), a company that manufactures dresses. Mzanzifashion uses fabric to manufacture its dresses. The management accountant has computed the value of fabric on 31 August 2023. The inventory value of fabric has been calculated as follows using the First-in-first-out (FIFO) valuation method:

Date Receipts Issues Balance

Date Quantity Price Amount Quantity Price Amount Quantity Price Amount

Units R R Units R R Units R R

375 15 5 625 375 15 5 625 1 1 125 18 20 250 1 125 18 20 250 8 375 15 5 625 75 18 1 350 1 050 18 18 900 12 1 050 18 18 900 750 22 16 500 750 22 16 500 17 -300 18 -5 400 750 18 13 500 750 22 16 500 31 750 18 13 500 750 22 16 500

Additional information:

The management accountant also used the following in calculating the inventory value of fabric:

Date Transaction

3 Purchased material.

8 Issued material to production.

12 Purchased material.

17 Returned units purchased on the 3rd and was not yet issued to production.

30 Issued material to production.

The management accountant has requested to be informed what the value of inventory of fabric would be on 31 August 2023, if the Weighted average method of inventory valuation is used. Assume the details of opening inventory on 1 August 2023 would be the same as for the FIFO method.

REQUIRED Marks INDEPENDENT PART A

(a) Calculate the value of inventory of fabric on 31 August 2023 for Mzanzi-fashion (Pty) Ltd as requested by the management accountant. Note: Round off the inventory value per unit to 2 decimal places.

(b) If you had a manufacturing company that manufactures cars, which inventory valuation system would you use to value inventory? Also motivate why.