QUESTION 1:
REQUIRED
Study the Statement of Financial Position of Atlas Ltd as at 31 May 2015 (including the notes) and answer the following questions:
1.1 How much of the profit after tax was retained by Atlas Limited for the year ended 31 May 2015?
1.2 Atlas Ltd made an application to Senzo Manufacturers to purchase goods on credit.
Should Senzo Limited approve the application? Motivate your answer with the use of the relevant ratios.
1.3 Comment and make recommendations with regard to the following:
1.3.1 Property, plant and equipment (R700 000)
1.3.2 Fixed deposit (R200 000)
1.3.3 Inventories (R800 000)
Atlas Ltd
EXTRACT OF STATEMENT OF FINANCIAL POSITION AS AT 31 MAY 2015
|
ASSETS
|
Note
|
|
|
|
Non-current assets
|
|
|
900
|
000
|
|
Property, plant and equipment
|
1
|
|
700
|
000 I
|
|
Fixed deposit (6% p.a.)
|
|
|
200
|
000
|
|
Current assets
|
|
1
|
500
|
000
|
|
Inventories
|
|
|
800
|
000
|
|
Accounts receivable/Debtors
|
|
|
600
|
000
|
|
Cash
|
|
|
100
|
000
|
|
|
|
2
|
400
|
000
|
|
EQUITY AND LIABILITIES Equity
|
|
|
|
|
?
|
|
Ordinary share capital
|
|
1 200 000
|
|
Retained earnings
|
2
|
?
|
|
Non-current liabilities
|
|
325 000
|
|
Long-term loan (18% p.a.)
|
|
325
|
000 I
|
|
Current liabilities
|
|
575
|
000
|
|
Accounts payable/Creditors
|
|
400
|
000
|
|
Dividends payable
|
|
175
|
000
|
|
|
|
2400
|
000
|
QUESTION 2
REQUIRED
Study the information provided below and answer the following questions:
2.1 It is the policy of Saturn Limited to retain 4096 of the profit after tax. Was this policy adhered to for the financial year ended 31 December 2014? Motivate your answer.
2.2 Has management been efficient in the management of its accounts receivable? Use the relevant ratio to motivate your answer.
2.3 Is Saturn Limited taking advantage of the credit terms offered by its trade creditors? Substantiate your answer.
2.4 Would the shareholders of Saturn Limited be satisfied with their return on investment? Why?
2.5 Suppose Saturn Limited purchases goods for R600 000.
How much should it sell the goods for and still maintain the existing gross margin ratio?
Information
Excerpts of financial statement of saturn Limited for 2014 are as follows:
|
Statement of Comprehensive Income for the year ended 31 December 2014
|
|
|
R
|
|
Sales (all credit)
|
7 000 000
|
|
Cost of sales
|
(5 600 000)
|
|
Gross profit
|
1 400 000
|
|
Operating expenses
|
(800 000)
|
|
Operating profit
|
600 000
|
|
Interest expense
|
(150 000)
|
|
Profit before tax
|
450 000
|
|
Tax
|
(135 000)
|
|
Statement of Financial Position as at 31 December 2014
|
|
|
|
|
|
|
R
|
|
Assets
|
|
|
|
|
Non-current assets
|
|
700
|
000
|
|
Inventories
|
1
|
600
|
000
|
|
Accounts receivable
|
|
800
|
000
|
|
Cash
|
|
100
|
000
|
|
|
3
|
200
|
000
|
|
Equity and liabilities
|
|
|
|
|
Ordinary share capital
|
1
|
200
|
000
|
|
Retained earnings
|
|
500
|
000
|
|
Long-term loan (15%)
|
|
800
|
000
|
|
Accounts payable
|
|
400
|
000
|
|
Dividends payable
|
|
100
|
000
|
|
Other current liabilities
|
|
200
|
000
|
|
|
3
|
200
|
000
|
QUESTION 3
REQUIRED
Study the information given below and answer the following questions independently:
3.1 Calculate the number of skirts that Beads4us must make in order to break even each month.
3.2 Calculate the selling price per unit that will enable Beads4us to break even (at the expected sales volume).
3.3 Calculate the total contribution margin and operating profit (loss) if the selling price is R30 below the normal selling price.
3.4 Beads4us is considering paying the sales persons a monthly salary instead of paying a sales commission. How much can it afford to pay in salaries and achieve an operating profit of R50 000 per month.
3.5 Suppose the business has an opportunity to rent machines in order to reduce work time.
Doing so would increase the total fixed costs of operating the workshop by R12 000 per month. Using the machines will reduce the labour time to 1.5 hours for each skirt.The employees who make the skirts will still be paid R30 per hour and material costs remain unchanged.
Will renting the machines be more profitable?Show the relevant calculations.
QUESTION 4
4.1 REQUIRED
Study the Cash Budget as well as the other information given below and answer the following questions:
4.1.1 Calculate the total budgeted sales for January 2016.
4.1.2 How much is Heinz Enterprises owing to AB Bank?
4.1.3 How much will be paid to the employees during January?
4.1.4 Calculate the total purchases for January 2016.
4.1.5 Is the cash position of the business satisfactory? Explain.
Information
|
Cash Budget of Heinz Enterprises for the 3 months ended 31 March 2016
|
|
|
January
|
February
|
March
|
|
Cash receipts
|
214 000
|
205 400
|
224 800
|
|
Cash sales
|
114 000
|
125 400
|
136 800
|
|
Receipts from debtors
|
100 000
|
80 000
|
88 000
|
|
Cash payments
|
?
|
(225 820)
|
(214 820)
|
|
Cash purchases of inventory
|
45 000
|
43 000
|
47 000
|
|
Payments to creditors
|
50 000
|
60 000
|
45 000
|
|
Salaries and wages
|
?
|
40 320
|
40 320
|
|
Interest on loan
|
(15%)
|
2 500
|
2 500
|
2 500
|
|
Other cash operating expenses
|
80 000
|
80 000
|
80 000
|
|
Cash surplus
|
(shortfall)
|
|
?
|
20 420
|
9 980
|
|
Opening cash balance
|
25 000
|
?
|
?
|
| Closing cash balance |
? |
? |
? |
Additional information
1. Cash sales make up 60% of the total sales and a 5% discount is granted on these sales. The balance of the sales is on credit and is collected in the month after the sale.
2. 50% of the purchases of inventory are for cash and the balance is paid for two months after the purchase.
3. Salaries increase by 12% with effect from 01 February 2016.
4. Interest is paid monthly on the loan from AB Bank.
4.2 REQUIRED
Use the information provided below to :
4.2.1 Calculate the total contribution margin if the special order is rejected.
4.2.2 Determine the effect on the operating profit if the special order is accepted.
INFORMATION
The following information was supplied by Umbro Limited in respect of the T-shirts that it manufactures:
|
|
|
R
|
|
Sales (10 000 T-shirts)
|
400
|
000
|
|
Direct materials
|
140
|
000
|
|
Direct labour
|
60
|
000
|
|
Variable factory overheads
|
40
|
000
|
|
Variable selling and administrative costs
|
22
|
000
|
|
Fixed factory overheads
|
60
|
000
|
|
Fixed selling and administrative costs
|
58
|
000
|
Suppose Umbro Limited received a special order for 1 000 T-shirts at R28 per unit that:
• would use otherwise idle capacity.
• would not require any additional variable selling and administrative expenses.
QUESTION 5
5.1 REQUIRED
Use the information given below to calculate the following:
5.1.1 Net Present Value of the project (Round off amounts to the nearest rand.)
5.1.2 Accounting Rate of Return (on average investment).
5.1.3 Internal Rate of Return, if the net cash inflows are R150 000 per year for 5 years and the equipment has no resale value.
5.2 REQUIRED
Use the information given below to calculate the following variances: 5.2.1 Raw material usage variance
5.2.2 Direct labour efficiency variance