QUESTION 2

(20 MARKS)

2.1

	Economic Order Quantity
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=
=
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(5 marks)

2.2

2.2.1

WORKINGS

WEIGHTED AVERAGE COST METHOD.

Weighted average cost per unit	=
	=

The value of closing inventory as at 31 March 2021

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=

The value of issues for March 2021

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=

(6 marks)

2.2.2

LAST-IN-FIRST-OUT (LIFO) METHOD.

The value of closing inventory as at 31 March 2021

The value of issues for March 2021

(5 marks)

2.3

	Cost of not accepting a discount
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					1
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REQUIRED Calculate the annual Economic Order Quantity (EQ) from the information provided below. (5 marks) INFORMATION Aston Wholesalers expects to sell approximately 10 000 cases of soft drinks during 2022. The cost of placing an order for soft drinks is estimated to be R24. The inventory holding cost of one case of soft drinks is 3% of the cost price. The selling price of a case of soft drinks is R150 and the Aston Wholesalers uses a mark-up of 50% on cost. 2.2 REQUIRED Use the information provided below to calculate the value of closing inventory as at 31 March 2021 and issues to production for March 2021 using the following methods of inventory valuation: 22.1 Weighted average cost method with the weighted average cost per unit expressed to the nearest cent) (6 marks) 222 Last-in-first-out (LIFO) method. (5 marks) INFORMATION The following transactions of Enver Enterprises took place during March 2021 in respect of a component used in production: Date Transactions 01 10 Opening inventory Purchased from a supplier Returned to the supplier (purchased on 10 March) Purchased from a supplier Issued to production during March 400 units @ R10 per unit 1 000 units @ R11 per unit 200 units 14 20 800 units @ R12 per unit 1 500 units 31 2.3 REQUIRED Use the information provided below to calculate the cost (as a percentage) to Orbit Stores of not accepting the discount Express the answer to two decimal places. (4 marks) INFORMATION Summit Wholesaler's normal credit terms to Orbit Stores are 30 days but the supplier is prepared to allow a 2.5% relate it Orbit Stores pays the account within 10 days