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QUESTION 1 5 0 MARKS You have recently joined Slam ( Pty ) Ltd , a company that manufactures and distributes brake pads to the

QUESTION 1
50 MARKS
You have recently joined Slam (Pty) Ltd, a company that manufactures and distributes brake pads to the automotive industry, as a financial accountant. The managing director and majority shareholder has asked you to assist him in interpreting the draft financial results for the year ended 30 April 2024 and to review the budget for the new financial year. The company uses first-in-fist out method of inventory valuation. As part of his preparations for the budget for the financial year ending 30 April 2025, the accountant completed a breakeven analysis and concluded that the breakeven production and sales volume amounted to 20500 units. The fact that the company only sold 20000 units but is reporting a preliminary profit of R112000 for the year ended 30 April 2024 has raised a concern about the integrity of the information generated by finance. You established the following:
The draft income statement for the year ended 30 April 2024 is as follows:
\table[[,Amount (ZAR)],[Sales,2000000],[Cost of sales,1628000],[@, Inventory at beginning of year,-],[@, Raw materials,500000],[@, Direct labour costs,600000],[@, Manufacturing overheads,935000],[@, Inventory at the end of the year: finished products,(407000)
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