The following information relates to the Plus Factors Group plc for the years to 30 September 20X8 and 20X9:

Environmental and social reporting • 839 Notes 20X9 20X8

£000 £000 Associated company share of profit 10.9 10.7 Auditors’ remuneration 12.2 11.9 Creditors for materials At beginning of year 1,109.1 987.2 At end of year 1,244.2 1,109.1 Debtors At beginning of year 1,422.0 1,305.0 At end of year 1,601.0 1,422.0 11% debentures 1 500.0 600.0 Depreciation 113.7 98.4 Employee benefits paid 109.9 68.4 Hire of plant, machiner y and vehicles 2 66.5 367.3 Materials paid for in year 3,622.9 2,971.4 Minority interest in profit of the year 167.2 144.1 Other overheads incurred 1,012.4 738.3 Pensions and pension contributions paid 319.8 222.2 Profit before taxation 1,437.4 1,156.4 Provision for corporation tax 464.7 527.9 Salaries and wages 1,763.8 1,863.0 Sales 3 9,905.6 8,694.1 Shares at nominal value Ordinar y at 25p each fully paid 4 2,500.0 2,000.0 7% preference at £1 each fully paid 4 500.0 200.0 Stocks of materials Beginning of year 804.1 689.7 End of year 837.8 804.1 Ordinar y dividends were declared as follows:

Interim 1.12 pence per share (20X8, l.67p)

Final 3.57 pence per share (20X8, 2.61p)

Average number of employees was 196 (20X8, 201)

Notes:

1 £300,000 of debentures were redeemed at par on 31 March 20X9 and £200,000 new debentures at the same rate of interest were issued at £98 for each £100 nominal value on the same date.

The new debentures are due to be redeemed in five years’ time.

2 This is the amount for inclusion in the profit and loss account in accordance with SSAP 21.
3 All the groups’ sales are subject to value added tax at 15% and the figures given include such tax.
All other figures are exclusive of value added tax. This VAT rate has been increased to 17.5% and may be subject to future changes, but for the purposes of this question the theor y and workings remain the same irrespective of the rate.
4 All shares have been in issue throughout the year.
The statement of value added is available for 20X8 and the 20X9 statement needs to be completed.
840 • Accountability Workings £000 Turnover 1 7,560.1 Less: Bought-in materials and ser vices 2 4,096.4 Value added by group 3,463.7 Share of profits of associated company 10.7 3,474.4 Applied in the following ways To pay employees 3 2,153.6 62.0%
To pay providers of capital 4 566.5 16.3%
To pay government 527.9 15.2%
To provide for maintenance and expansion of assets 5 226.4 6.50%
3,474.4 100.0%
Workings 1 Turnover Sales inclusive of VAT 8,694.1 VAT at 15% 1,134.0 7,560.1 2 Bought-in materials and ser vices Cost of materials Creditors at end of year 1,109.1 Add: Payments in year 2,971.4 4,080.5 Less: Creditors at beginning of year 987.2 Materials purchased in year 3,093.3 Add: Opening stock 689.7 Less: Closing stock (804.1)
Materials used 2,978.9 Add: Cost of bought-in ser vices Auditors’ remuneration 11.9 Hire of plant, machiner y and vehicles 367.3 Other overheads 738.3 4,096.4 3 To pay employees Benefits paid 68.4 Pensions and pension contributions 222.2 Salaries and wages 1,863.0 2,153.6 4 To pay providers of capital Debenture interest 11% of £600,000 66.0 Dividends Preference 20X8 7% of £200,000 14.0 Ordinary 20X8 8 million shares at 4.28p 342.4 Minority interest 144.1 566.5 5 To provide for maintenance and expansion of assets Profit before tax 1,156.4 Less: tax (527.9)
: minority interest (144.1)
: dividends (356.4)
Retained profits 128.0 Depreciation 98.4 226.4 Ar ton Blendale Clifear n £ £ £ £ £ £
Sales 910,800 673,200 382,800 Cost of sales 633,100 504,900 287,100 Gross profit 277,700 168,300 95,700 Less: Expenses:
David Mark’s salar y 10,560 10,560 10,560 Other salaries and wages 143,220 97,020 78,540 Rent 19,800 Rates 8,920 5,780 2,865 Advertising 2,640 2,640 2,640 Deliver y van expenses 5,280 5,280 5,280 General expenses 11,220 3,300 1,188 Telephone 2,640 1,980 1,584 Wrapping materials 7,920 3,960 2,640 Depreciation:
Fixtures 8,220 4,260 2,940 Vehicle 3,000 203,620 3,000 157,580 3,000 111,237 Net profit/(loss) 74,080 10,720 (15,537)

The figures for the year ended 31 May 20X4 follow the pattern of recent years. Because of this, David Mark is proposing to close the Clifearn supermarket immediately.
David Mark employs 12 full-time and 20 par t-time staff. His recruitment policy is based on employing one extra par t-time assistant for ever y £30,000 increase in branch sales. His staff deployment at the moment is as follows:
Ar ton Blendale Clifear n Full-time staff (including managers) 6 4 2 Par t-time staff 8 6 6 Peter Gaskin, the manager of the Clifearn supermarket, asks David to give him another year to make the supermarket profitable. Peter has calculated that he must cover £125,500 expenses out of his gross profit in the year ended 31 May 20X5 in order to move into profitability. His calculations include extra staff costs and all other extra costs.
Additional information:
1 General adver tising for the business as a whole is controlled by David Mark. This costs £3,960 per annum. Each manager spends a fur ther £1,320 adver tising his own supermarket locally.
2 The deliver y vehicle is used for deliveries from the Ar ton supermarket only.
3 David Mark has a central telephone switchboard which costs £1,584 rental per annum. Each supermarket is charged for all calls actually made. For the year ended 31 May 20X4 these amounted to:
Arton £2,112 Blendale £1,452 Clifearn £1,056 Required:

(a) A report addressed to David Mark advising him whether to close Clifearn supermarket. Your report should include a detailed financial statement based on the results for the year ended 31 May 20X4 relating to the Clifearn branch.

(b) Calculate the increased turnover and extra staff needed if Peter’s suggestion is implemented.

(c) Comment on the social implications for the residents of Clifearn if (i) David Mark closes the supermarket, (ii) Peter Gaskin’s recommendation is undertaken.
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