Budgeting questions

Information:

Desmond Tutu HIV Foundation receives research funding from overseas funders.

We would budget in Rands, and then present the budget to the overseas funder in their local currency.

The funding is typically limited to the amount of foreign currency we apply for when submitting the budget.

The Foundation is VAT registered, salaries are increased annually in January by 8%, and the average inflation for goods is 6%.

Budget preparation date: Today's date; Exchange rate: 15:1; Duration of project: 3 years; Project start date: 1 January 2018

Project end date: 31 December 2020

Question 1:

We are importing an asset costing $10,000.

Please calculate the total cost of the asset, documenting and including all costs necessary to bring the asset into full working

condition for its intended use.

Answer:

Question 2A:

The Foundation is performing a clinical trial whereby participants ("patients") have to have set procedures

happen at set timepoints in their treatment. The trial starts one year from now, and has the participants getting an

HIV test which costs R114 (cost today including VAT), when they are recruited, and another test a year later when they

come in for a follow up visit. These test kits have a limited shelf life and should be purchased just before they are used.

The Foundation is expected to recruit 10 participants immediately when the trial starts, and then recruit another 20

participants at the beginning of the second year of of the study (while the first 10 are coming back for follow-up).

Calculate below what the final costs would be for these HIV Kits for all 25 enrolled participants, showing what how much

needs to be spent year 1, year 2 and year 3 of the trial.

Answer:

Question 2B:

The Researcher has a salary of R1 000 000 as at January 2017. Please calculate his salary for years 1, 2 and 3.

Question 3A:

Write down below what exchange rate you would use, and why, when converting the Rand budget to the foreign currency.

What would you do to mitigate the forex exchange rate fluctuation.

Answer:

Assume that we have to pay 2 collaborators on the project being budgeted for - one local and one foreign. Both are to be paid R30 000.

Please calculate the foreign currency amount using the exchange rate as in 3A above, and state whether there are any VAT implications, and why.