QUESTION 1 [25 MARKS]

Costing systems attempt to explain how products consume resources but do not indicate the joint benefits of having multiple products.

Required:

Citing examples of at least two costing systems,

a. Explain the statement above. (4 marks)

b. Explain how the addition of a new product to the product range may affect the cost of existing products. (10 marks)

c. Outline the consequences, in terms of profitability, of decision to increase/decrease the product range. (5 marks)

d. Identify six costing systems. (6 marks)

QUESTION 3 [25 MARKS]

Read the following information and answer the questions that follow.

Cash balance as at 31/12/2021 was P5000

Interest on savings is P100

Long term loan taken in January 2022 was P25000, that will be paid in 5 years

Loan repayment installment is P450 which will start end of February 2022

Revenue for January was P15 000, February P18 000, March P20 000, April P19 000

Salaries per month amount to P15 000

Rental payment per month is P3 500

Advertising and promotion is P1 000 paid once in two months

Telephone expenses P500

Utilities estimated at P1000 per month

Bought a second hand mini tractor for P15 000 cash in February 2022

Required:

a. Construct a cash budget for the first four months of 2022. (20 marks)

b. Identify and briefly explain three reasons for a cash budget. (5 marks