Answer ALL questions. $[100$ MARKS$]$

QUESTION $1(25$ Marks$)$

REQUIRED

Study the Statement of Financial Position as at $31$ December $2021$ and $2020$ before answering the following questions:

$1\mathrm{.}1$ Calculate the amount that would be reflected as $$Working capital changes$$ in the

Statement of Cash Flows for the year ended $31$ December $2021.(4$ marks$)$

$1\mathrm{.}2$ Did the company expand its operations during $2021?$ Motivate your answer. $(3$ marks$)$

$1\mathrm{.}3$ Is the long$-$term loan correctly disclosed in the Statement of Financial Position? Explain. $(2$ marks$)$

$1\mathrm{.}4$ Is the company in good financial health? Motivate your answer by referring to at least SIX

$(6)$ items on the statement. Ratios are not required. $(12$ marks$)$

$1\mathrm{.}5$ Calculate the ratios $($expressed to two decimal places$)$ that would reflect the following:

$1\mathrm{.}5\mathrm{.}1$ A measure of the company$$s ability to settle its short$-$term obligations within twelve months. $(2$ marks$)$

$1\mathrm{.}5\mathrm{.}2$ A measure of the amount of total assets that are financed by creditors instead of investors. $(2$ marks$)$

INFORMATION

Lomax Ltd commenced operations at the start of $2020$ manufacturing only standard$-$sized bricks for the building industry. It$$s financial position at the end of $2020$ and $2021$ is evident in the statements provided below:

LOMAX LTD

STATEMENT OF FINANCIAL POSITION AS AT $31$ DECEMBER:

$2021$

$2020$

R

R

ASSETS

Non$-$current assets

Property, plant and equipment $($Cost$)$

$?$

$?$

Accumulated depreciation

$(500000)$

$(365000)$

Carrying value

$?$

$?$

Investments

$2700000$

$3150000$

Current assets

Inventories

$193500$

$29000$

Accounts receivable

$1300000$

$1100000$

Cash

$235000$

$194500$

$6500000$

$6680000$

EQUITY AND LIABILITIES

Equity

Share capital

$745000$

$630000$

Retained earnings

$2380000$

$4450000$

Shareholders$$ equity

$3125000$

$5080000$

Non$-$current liabilities

Long$-$term loan

$2580000$

$880000$

Current liabilities

Accounts payable

$95000$

$120000$

Other current liabilities

$700000$

$600000$

$6500000$

$6680000$

Note

$1.$ There was no significant change in the sales figures over the two$-$year period.

$2.$ R$240000$ of the long$-$term loan is expected to be repaid during $2022.$

QUESTION $2(25$ Marks$)$

REQUIRED

Answer each of the following questions independently. As far as possible use the expanded contribution margin model to present your answers.

$2\mathrm{.}1$ Calculate the total Contribution Margin and Operating Profit $($Loss$)$ if all $30000$ pallets are

Sold. $(4$ marks$)$

$2\mathrm{.}2$ Calculate the margin of safety $($as a percentage$)$ for $2022.(4$ marks$)$

$2\mathrm{.}3$ Use the contribution margin ratio to calculate the sales value required to achieve an

operating profit of R$6000000.(4$ marks$)$

$2\mathrm{.}4$ Suppose an additional R$300000$ is spent on advertising in order to increase the sales by

$3000$ pallets. Calculate the number of pallets that need to be produced and sold to

break even. $(4$ marks$)$

$2\mathrm{.}5$ Suppose the management team of Lomax Ltd is considering a R$30$ per pallet decrease in

the selling price with the expectation that this would increase the sales volume by $10\%.$ Is

this a good idea? Motivate your answer with the relevant calculations. $(4$ marks$)$

$2\mathrm{.}6$ Determine the selling price per pallet that will enable Lomax Ltd to achieve an operating

profit of R$3192000.(5$ marks$)$

INFORMATION

Lomax Ltd sells the bricks that it produces in pallets, with each pallet containing $500$ bricks. The following budgeted information for $2022$ is available:

The number of pallets that are expected to be produced and sold during $2022$ is $30000.$ Each pallet is expected to be sold for R$500.$ The direct materials cost per brick is R$0\mathrm{.}14$ whilst the direct labour cost per brick is R$0\mathrm{.}08.$ R$0\mathrm{.}04$ per brick goes towards variable manufacturing overheads. Fixed manufacturing overheads are expected to total R$1500000.$ Annual advertising and salespersons salaries are estimated at R$2160000.$

The salespersons are also entitled to a sales commission of $6\%.$ Fixed administration costs are expected to be R$3840000$ whilst other administration costs are estimated at R$40$ per pallet sold.

The management is examining various proposals to assist in decision$-$making for $2022.$

QUESTION $3(25$ Marks$)$

REQUIRED

Use the information given below to answer the following questions:

$3\mathrm{.}1$ Prepare the Cash Budget for January, February and March $2022.(22$ marks$)$

$3\mathrm{.}2$ Comment on the cash position of the company for the budgeted period. $(3$ marks$)$

INFORMATION

$1.$ Some of the items in the Statement of Financial Position as at $31$ December $2021$ of Lomax Ltd are as follows:

Current assets

R

Accounts receivable

$1300000$

Bank

$235000$

Current liabilities

Accounts payable $($for material purchases$)$

$95000$

Other current liabilities

$700000$

$2.$ The following forecasts have been made by Lomax Ltd for the first three months of $2022$ for the bricks that it produces which are sold in pallets $($with each pallet comprising $500$ bricks$)$:

$2\mathrm{.}1$ The sales manager anticipates the following credit sales:

January

February

March

$2160$ pallets

$2340$ pallets

$2250$ pallets

The bric