ACTIVITY 1 (FIFO METHOD)
REQUIRED
1. Calculate the value of the closing stock (unsold stock) on 28 February 2023.
2. Calculate the gross profit at the end of the financial year.
INFORMATION
Cube SA is a business that sells rubix cubes. Their financial year ends 28 February each
year.
Transactions during the financial year ending 2023.
Information Number of Cost per unit Total value
units
Opening stock (1 March 2023) 81 (a) R3 645
Purchases April 2023 (b) R50 R6 150
Purchases July 2023 67 R65 (c)
Purchases Oct 2023 23 (d) R1 587
Returns 9 (e) R450
Closing stock (28 Feb 2023) ? ?
• The business sold 203 rubix cubes during the financial year at R140 each.
• The business uses the FIFO method to determine the value of the closing stock.
• The business uses the periodic inventory system.
• The business pays R5 carriage on purchases on each rubix cube.
• The supplier did not refund the carriage on purchases for the rubix cubes that
were returned.
MEMORANDUM
First, complete the figures in the table.
Second, find the number of units unsold (closing stock)
Information Number of Cost per unit Total value
units
Opening stock (1 March 2023) 81 (a) R45 R3 645
Purchases April 2023 (b) 123 R50 R6 150
Purchases July 2023 67 R65 (c) R4 355
Purchases Oct 2023 23 (d) R69 R1 587
Returns 9 (e) R69 R621
Closing stock (28 Feb 2023) (f) (g)
(a) R3 645 ÷ 81 = R45
(b) R6 150 ÷ R50 = 123 units
(c) 67 x R65 = R4 355
(d) R1 587 ÷ 23 = R69
(e) R621 ÷ 9 = R69
(f) Closing stock = 81 + 123 + 67 + 23 – 9 – 203 = 82 units
1. Calculate the value of the closing stock (unsold stock) on 28 February 2023.
Now that you know how many units were not sold (82), we can determine the value of
these units.
Purchases Units Cost price Value
Oct 14 (R69 + R5) = R74 (14 x 74) = R1 036
July 68 (R65 + R5) = R70 (68 x 70) = R4 760
Total 82 R5 796
Value of closing stock = R5 796
2. Calculate the gross profit at the end of the financial year.
Cost of sales = Opening stock + purchases + carriage on purchases – returns –
closing stock
Cost of sales = 3 645 + (6 150 + 4 355 + 1 587) + 5x(123 + 67 + 23) – 621 – 5 796
= 10 385
Sales = 203 x 140
= 28 420
Gross profit = Sales – Cost of sales
= 28 420 – 10 385
= 18 035
