Explaining Costs Incurred with Current Assets: Illustrate the effects of increasing current assets on shortage costs, carrying costs, total costs using a graph. Place the above-mentioned costs on the vertical axis and current assets on the horizontal axis. Based on the graph, indicate and explain the optimal investment in current assets. (15 marks) Answer scheme:
Labelling y-axis (1 mark)
Labelling x-axis (1 mark)
Graph pattern of shortage costs (2 marks)
Graph pattern of carrying costs (2 marks)
Graph pattern of total costs (2 marks) .
Indicate the optimal level of current assets (3 marks)
Explain why that is the optimal level of current assets (4 marks)
STATEMENTS OF FINANCIAL POSITION STATEMENTS OF FINANCIAL POSITION EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital Reserves Retained earnings \begin{tabular}{rrrrrr} 17 & 124,997 & 124,997 & 124,997 & 124,997 & 124,997 \\ 18 & 1,559 & 1,559 & 1,559 & & \\ & 55,204 & 38,772 & 19,669 & 36,696 & 34,064 \\ \hline 181,760 & 165,328 & 146,225 & 161,693 & 159,061 \\ & (23) & (21) & (19) & & \\ \hline 181,737 & 165,307 & 146,206 & 161,693 & 159,061 \\ \hline \end{tabular} Non-current liabilities Lease liabilities Deferred tax liabilities Deferred income Total non-current liabilities Current liabilities Loan and borrowing Lease liabilities Trade and other payables Contract liabilities Current tax liabilities Total current liabilities TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES \begin{tabular}{rrrrrr} 19 & 138 & 264 & 414 & & \\ 13 & 167 & 150 & 127 & & \\ 20 & 7,064 & 19,663 & 39,719 & & \\ \cline { 2 - 6 } & 7,369 & 20,077 & 40,260 & & \\ \hline & & & & & \\ 19 & 146 & 183 & 249 & & \\ 21 & 4,027 & 2,552 & 4,690 & 22,196 & 13,827 \\ 22 & 85 & 103 & 237 & & \\ \hline & & & 50 & & \\ \cline { 2 - 6 } & 4,258 & 2,838 & 5,538 & 22,196 & 13,827 \\ \hline & 11,627 & 22,915 & 45,798 & 22,196 & 13,827 \\ \hline & 193,364 & 188,222 & 192,004 & 197,889 & 172,888 \\ \hline \hline \end{tabular} For the financial year ended 30 June 2021 STATEMENTS OF FINANCIAL POSITION STATEMENTS OF FINANCIAL POSITION EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital Reserves Retained earnings \begin{tabular}{rrrrrr} 17 & 124,997 & 124,997 & 124,997 & 124,997 & 124,997 \\ 18 & 1,559 & 1,559 & 1,559 & & \\ & 55,204 & 38,772 & 19,669 & 36,696 & 34,064 \\ \hline 181,760 & 165,328 & 146,225 & 161,693 & 159,061 \\ & (23) & (21) & (19) & & \\ \hline 181,737 & 165,307 & 146,206 & 161,693 & 159,061 \\ \hline \end{tabular} Non-current liabilities Lease liabilities Deferred tax liabilities Deferred income Total non-current liabilities Current liabilities Loan and borrowing Lease liabilities Trade and other payables Contract liabilities Current tax liabilities Total current liabilities TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES \begin{tabular}{rrrrrr} 19 & 138 & 264 & 414 & & \\ 13 & 167 & 150 & 127 & & \\ 20 & 7,064 & 19,663 & 39,719 & & \\ \cline { 2 - 6 } & 7,369 & 20,077 & 40,260 & & \\ \hline & & & & & \\ 19 & 146 & 183 & 249 & & \\ 21 & 4,027 & 2,552 & 4,690 & 22,196 & 13,827 \\ 22 & 85 & 103 & 237 & & \\ \hline & & & 50 & & \\ \cline { 2 - 6 } & 4,258 & 2,838 & 5,538 & 22,196 & 13,827 \\ \hline & 11,627 & 22,915 & 45,798 & 22,196 & 13,827 \\ \hline & 193,364 & 188,222 & 192,004 & 197,889 & 172,888 \\ \hline \hline \end{tabular} For the financial year ended 30 June 2021
