Blog

6.3 GOODWOOL Manufacturers     You are provided with information relating to Goodwool Manufacturers for the year ended 28 February 2021. The business produces jerseys.     6.3.1 Calculate the break-even point for 2021. (4)   6.3.2 Explain whether Jannie the owner, should not be concerned about the break-even point for 2021. Quote relevant figures. (3)   6.3.3 Direct material cost per unit and direct labour cost per unit have shown significant changes. Provide TWO different reasons regarding the change in unit cost for each item on the table provided below. (8)   INFORMATION:   TOTAL 2021 2020 FIXED COSTS R3 161 070 R42 R42 VARIABLE COSTS 6 525 000 R87 R57 Direct material 2 250 000 R30 R36 Direct labour 3 375 000 R45 R33 Selling and distribution 900 000 R12 R6 Number of units produced and sold   75 000 67 500 Selling price per unit   R180 R140 Break-even units (number)   ? 34 157 [43]  

  EQUITY AND LIABILITIES       Ordinary shareholders’ equity 7 705 000      Ordinary share capital 6 700 000 4 500 000    Retained income 1 005 000     Non-current liabilities 1 680 000 600 000    Mortgage loan: Jozi Bank 1 680 000 600 000   Current liabilities 880 000      Trade and other payables 705 000      SARS (Income tax) 0 24 000    Shareholders for dividends 175 000      Bank overdraft 0 220 000   TOTAL EQUITY AND LIABILITIES    

  B. Balance of the debtor’s control on 30 June 2020, amounted to R175 700.     C. Balance according to the debtor’s ledger on 30 June 2020.   Debtors Amount due Credit limits S Chuta 46 500 30 000 T. Nche 31 800 35 000 T. Msweli 27 000 30 000 J. Bekker 63 200 40 000 P Pillay 8 600 10 000 TOTAL 177 100       D. The following errors and omissions were discovered and must be corrected:       (i) The debtor’s Journal was overcast by R4 100.       (ii) Goods sold on credit to P Pillay were incorrectly posted to the account of T. Nche, R7 600.       (iii) An allowance on damaged goods delivered to S. Chuta R1 400, was posted to the wrong side of his account.       (iv) An invoice issued to T. Msweli for, R2 300 was not entered in the books of Stonehaven Traders.       (v) No entry was made of an EFT for R8 700, received from P. Pillay in settlement of an invoice for R9 000.       (vi) Goods sold on credit to J. Bekker for R4 700, was correctly entered in the debtors Journal, but was posted to her account in the debtors’ ledger as R7 400.    

QUESTION 4: DEBTORS RECONCILIATION, AGE ANALYSIS AND VAT (43 marks; 26 minutes) 4.1 Choose the correct answer from the words provided within brackets. Write only the answer, next to each number (4.1.1 – 4.1.3) in the ANSWER BOOK.     4.1.1 A (debit/credit) balance on the bank account indicates a positive balance.     4.1.2 A (debit note/credit note) is the source document for goods returned to a creditor.     4.1.3 A (cash discount/discount allowed) is offered when accounts are settled within a certain time. (3) 4.2 DEBTORS RECONCILIATION AND AGE ANALYSIS     Stonehaven Traders, owned by Manie McDonald, sells products for cash and on credit. Their credit terms are 30 days, but they are budgeting that 80% of their debtors will adhere to the credit terms.     REQUIRED:     4.2.1 Briefly explain why the balance of the debtors control account should correspond with the total of the list of debtors. (4)   4.2.2 Calculate the correct closing balance of the debtors control account on 30 June 2020. (6)   4.2.3 Prepare a correct list of debtors of Stonehaven Traders on 30 June 2020.  Show all calculations. (14)   4.2.4 Study information A and C below then answer the following questions:       ·   Stonehaven Traders don’t have effective control over their Debtors. Quote two figures to motivate this statement. (4)     ·     State TWO actions that Stonehaven Traders could take in order to encourage debtors to settle their accounts according to the credit terms. (4)   INFORMATION:     A. Debtors age analysis schedule for June 2020:   TOTAL CURRENT 30 DAYS 60 DAYS 90 DAYS R177 100 R33 700 R26 300 R72 600 R44 500

QUESTION TOPIC MARKS TIME GUIDE (MINUTES) 1 Financial Statements and Notes to Financial Statements 59 34 2 Cash Flow Statement, Notes to Financial Statements and Ratios 43 26 3 Interpretation of Financial Information 36 22 4 Debtors’ Reconciliation, Age Analysis and VAT 43 26 5 Inventory Valuation and Problem Solving 33 20 6 Manufacturing 43 26 7 Budgeting 43 26 TOTAL 300 180

  C. Addisionele inligting en aansuiwerings     (i) Salarisse en lone:       Sewe  werknemers werk direk op die produksieproses en verdien ’n maandelikse salaris van R14 000 elk.  Alle werkers ontvang in Desember ’n 13de bonustjek, wat gelykstaande is aan 90% van hul maandelikse salaris gedurende Desember 2020.  Bonusse is nie onderhewig aan persioenaftrekkings en pensioenbydraes nie.         Die fabrieksvoorman verdien ’n jaarlikse basiese salaris van  R160 000. Die administratiewe personeel verdien R18 333 per maand in totaal. Alle werknemers dra 5% van hul basiese salaris by tot die pensioenfonds en die werkgewer se bydrae is 8%.     (ii) Water en elektrisiteit:       Die verkoop- en administratiewe kantore gebruik 15% van die water en elektrisiteit en die fabriek gebruik die res.     (iii) Herstelwerk en onderhoud:       ’n Verdere R14 300 is vir herstelwerk aan fabrieksmasjinerie verskuldig.       (iv) Huur uitgawes         Huur word toegedeel volgens die vloeroppervlakte, naamlik: Fabriek 700m², administratiewe kantore 120m², en verkoops-departement 180m².       (v) Waardevermindering word soos volg voorsien:         Fabrieksaanleg, R48 600 Kantoortoerusting, R8 880 Afleweringsvoertuig, R32 350  

  Question 1.4     Consumers are:   (1)

QUESTION 4: DEBTORS RECONCILIATION, AGE ANALYSIS AND VAT (43 marks; 26 minutes) 4.1 Choose the correct answer from the words provided within brackets. Write only the answer, next to each number (4.1.1 – 4.1.3) in the ANSWER BOOK.     4.1.1 A (debit/credit) balance on the bank account indicates a positive balance.     4.1.2 A (debit note/credit note) is the source document for goods returned to a creditor.     4.1.3 A (cash discount/discount allowed) is offered when accounts are settled within a certain time. (3) 4.2 DEBTORS RECONCILIATION AND AGE ANALYSIS     Stonehaven Traders, owned by Manie McDonald, sells products for cash and on credit. Their credit terms are 30 days, but they are budgeting that 80% of their debtors will adhere to the credit terms.     REQUIRED:     4.2.1 Briefly explain why the balance of the debtors control account should correspond with the total of the list of debtors. (4)   4.2.2 Calculate the correct closing balance of the debtors control account on 30 June 2020. (6)   4.2.3 Prepare a correct list of debtors of Stonehaven Traders on 30 June 2020.  Show all calculations. (14)   4.2.4 Study information A and C below then answer the following questions:       ·   Stonehaven Traders don’t have effective control over their Debtors. Quote two figures to motivate this statement. (4)     ·     State TWO actions that Stonehaven Traders could take in order to encourage debtors to settle their accounts according to the credit terms. (4)   INFORMATION:     A. Debtors age analysis schedule for June 2020:   TOTAL CURRENT 30 DAYS 60 DAYS 90 DAYS R177 100 R33 700 R26 300 R72 600 R44 500

  INFORMATION:     The following financial indicators were calculated on 30 April 2020:       2020 2019 Current ratio 2,5 : 1 2,1 : 1 Acid-test ratio 1,3 : 1 1,4 : 1 Debtors’ collection period 27 days 35 days Creditors’ payment period 44 days 57 days Debt-Equity ratio 0,3 : 1 0,5 : 1 Return on total capital employed 12% 14% Return on average shareholders’ equity 13,5% 14,5% Earnings per share 200 cents 160 cents Dividends per share 180 cents 40 cents Net asset value per share 770 cents 760 cents Market price per share (JSE) 960 cents 800 cents Repurchase price per share 800 cents 0 cent Interest rate on loan 14% 13%         [36]

QUESTION 6:  MANUFACTURING (43 marks; 26 minutes) MANDY MANUFACTURERS The business manufacturer’s security gates. The financial year ended 28 February 2021. REQUIRED:   6.1 Calculate the following for the year ended 28 February 2021:     6.1.1 Direct Material Cost (6)   6.1.2 Direct Labour Cost (7) 6.2 Prepare the Factory Overhead Cost Note (15) INFORMATION:   A. Stock balances       28 February 2021 1 March 2020 Raw material stock R640 000 R560 000 Work-in-process stock 450 000 660 000 Factory Indirect material 24 000 14 800     B. Summary of transactions:     Raw material purchased R2 230 000 Raw materials returned to suppliers 42 000 Carriage on raw materials 25 000 Factory indirect materials purchased 70 200 Water and electricity 70 000 Factory sundry expenses 110 500 Factory repairs and maintenance 36 500 Rent expenses paid 60 000 Insurance ? Commission to sales staff 37 000