QUESTION $1(20)$

Required:

Use the information given below to prepare the following for Altech Limited for July and August $2021$:

$1\mathrm{.}1$ Debtors Collection Schedule $(4)$

$1\mathrm{.}2$ Cash Budget $(16)$

Note: Provide separate monetary columns for each month. Where applicable, round off amounts to the nearest Rand.

Information:

Extract of Statement of Comprehensive Income for the month ended $30$ June $2021$

R

Sales $200000$

Cost of sales $100000$

Rent income $8000$

Advertising $4000$

Salaries and wages $10000$

Rates and taxes $1200$

Electricity $3000$

Other operating expenses $9000$

Additional information:

$1.$ The business uses a fixed mark$-$up of $100\%$ on cost$.$

$2.$ Sales are expected to increase by $10\%$ each month.

$3.$ Thirty percent $(30\%)$ of the sales are for cash and the balance is on credit. Collections from credit sales are as follows:

$$h $40\%$ in the month of the sale, and these customers are entitled to a $2\%$ discount;

$$h $55\%$ one month after the sale.

$$h The balance is usually written off as bad debts.

$4.$ Closing Inventories are kept at a constant level. $50\%$ of purchases are for cash. Creditors are paid one month after purchase.

$5.$ In terms of the lease agreement, the rental income will increase by $10\%$ per annum with effect from $01$ July $2021.$ Rent is received monthly.

$6.$ Advertising is paid monthly and is estimated to be the same percentage of sales as for June $2021.$

$7.$ Salaries and wages will increase by $10\%$ with effect from $01$ July $2021.$

$8.$ Rates and taxes will be paid in one instalment for the year during July $2021.$ Rates to be paid will amount to R$6000.$

$9.$ Other operating expenses are expected to increase by R$500$ every month. These expenses are paid for in the month in which they are incurred.

$10.$ Electricity is expected to increase by $12\%$ from $1$ August $2021$ due to tariff increases

$11.$ The balance in the bank on $30$ June $2021$ is estimated to be R$40000($favourable$).$

$2$

QUESTION $2(20)$

INFORMATION:

Vista Limited intends purchasing a new machine and has a choice between the following two machines:

Equipment A

Equipment B

Initial cost

R$220000$

R$240000$

Expected useful life

$5$ years

$5$ years

Scrap value

Nil

Nil

Expected net cash inflows:

R

R

End of:

Year $1$

$55000$

$70000$

Year $2$

$60000$

$70000$

Year $3$

$62000$

$70000$

Year $4$

$60000$

$70000$

Year $5$

$70000$

$70000$

The company estimates that its cost of capital is $12\%.$

Required:

$2\mathrm{.}1$ Calculate the Payback Period of both equipment. $($Answers must be expressed in years, months and days$).$

$(4)$

$2\mathrm{.}2$ Calculate the Accounting Rate of Return $($on initial investment$)$ for both equipment A and B$.($Answers must be expressed to $2$ decimal places$).(5)$

$2\mathrm{.}3$ Calculate the Net Present Value of each equipment. $($Round off amounts to the nearest Rand.$)(6)$

$2\mathrm{.}4$ Calculate the Internal Rate of Return of Equipment B$.(5)$

QUESTION $3(20)$

$3\mathrm{.}1$ Prepare a projected statement of comprehensive income for the year ended $31$ December $2021$ to determine the sales needed to produce a profit after tax that is $25\%$ more than that for the year ending $31$ December $2020.$

$($Where applicable round of amounts to the nearest rand$)(10)$

INFORMATION:

Calder Enterprises

Statement of Comprehensive Income for the year ended $31$ December $2020$

R

Sales

$5445000$

Cost of sales

$(3539250)$

Gross profit

$1905750$

Operating expenses

$(1122000)$

Income from operations

$783750$

Interest expense

$(98900)$

Profit before tax

$684850$

Income tax

$(191758)$

Profit after tax

$493092$

$3$

Additional information:

$1.$ Cost of sales is expected to be $60\%$ of sales.

$2.$ Operating expenses will increase by $4\%.$

$3.$ Interest expense will increase to R$120000.$

$4.$ The tax rate will remain at $28\%$

$3\mathrm{.}2$ Use the information from question $3\mathrm{.}1($not your solution$)$ and calculate the following for the year ending $31$ December $2020$:

$3\mathrm{.}2\mathrm{.}1$ Gross margin $(3)$

$3\mathrm{.}2\mathrm{.}2$ Net profit margin $(3)$

$3\mathrm{.}2\mathrm{.}3$ Operating margin $(2)$

$3\mathrm{.}2\mathrm{.}4$ Interest coverage $(2)$

QUESTION $4(20)$

Exxarro Llimited is considering pricing and costing for the year ahead. The following data based on expected production and sales of $15000$ units are provided for analysis:

Variable manufacturing cost

R$1185000$

Fixed manufacturing cost

R$510000$

Sales commission

R$5$ per unit sold

Fixed administration cost

R$130000$

Sales

R$210$ per unit

Study the information provided above and answer the following questions independently:

$4\mathrm{.}1$ Calculate the break$-$even sales value. $(5)$

$4\mathrm{.}2$ Calculate the sales volume required to achieve a profit of R $800000.(5)$

$4\mathrm{.}3$ Suppose Exxaro Limited is considering a decrease of $10\%$ per unit in the selling price of the product with the expectation that it would increase sales volume by $10\%.$ Is this a good idea? Motivate your answer with relevant calculations. $(10)$

QUESTION $5(20)$

$5\mathrm{.}1$ Study the extracts of the Cash Flow Statement of Conlog Limited for the year ended $31$ December $2020$ and answer the following:

$5\mathrm{.}1\mathrm{.}1$ What do you understand by $$Cash flow from operating activities R $150000?(4)$

$5\mathrm{.}1\mathrm{.}2$ Name three transaction