SECTION A [100 MARKS] Answer ALL the questions in this section. QUESTION ONE Bella Limited has examined the use of a new product which is assumed to improve profitability. You are required to analyse the following data in order to assist Bella Limited decide on whether or not the new project is in fact viable. INFORMATION The data provided is based on expected sales of 15000 units with a selling price per unit of R810. The costs associated with this project includes the following: Direct materials cost (R2 700 000), Direct labour cost (R1 800 000), Variable overhead costs (765 000), Fixed manufacturing overhead costs (R702000) and Fixed administrative and selling costs (R167400). In addition, selling commission per unit sold is 10%. REQUIRED Study the information provided below and answer each of the following questions independently: 1.1 1.1 Calculate the sales quantity and sales value required to break even. (5 marks) 1.2 Based on the expected sales volume of 15 000 units, determine the sales price per unit that will (5 marks) enable the company to break even. 1.3 If sales are 16 000 units, how much can the company spend on additional advertising and achieve (5 marks) an operating profit of R 5 000 000? 1.4 Should management consider a selling price of R830, if the sales volume is expected to decrease (5 marks) by 300units? Motivate your answer showing the relevant calculations. 1.5 Suppose more sales persons are employed, thereby increasing fixed salaries by R240000 but (5 marks) increasing sales by 500 units. Will profitability improve? Motivate your answer showing the relevant calculations.QUESTION TWO 2.1 You want to begin saving for your daughter's college education and you estimate that she will need (6 marks) R170 000 in 15 years. If you feel confident that you can earn 8.5% per year, how much do you need to invest today? 2.2 Suppose your company expects to increase unit sales of widgets by 16% per year for the next 6 (6 marks) years. If you currently sell 2 million widgets in one year, how many widgets do you expect to sell in 6 years? 2.3 You are looking at an investment that will pay R1 500 in 4 years if you invest R800 today. What is (8 marks) the Implied rate of Interest? 2.4 You want to purchase a new car and you are willing to pay R400 000. If you can invest at 11% per (5 marks) year and you currently have R300 000, how long will it be before you have enough money to pay cash for the car? QUESTION THREE 3.1 1 Cowy Traders is considering investing in project Beef. The following details relate to this project. Project Beef Initial Investment R562 500 Expected economic lifetime 4 years Minimum required rate of retum 12% Net annual cash Inflows R180 000 1 year R195 000 and year R210 000 and year R220 000 4th year Required Calculate the following in respect of Project Beef. 3.1.1 The payback period (answer expressed in years, months and days) [4 marks) 3.1.2 The net present value (NPV) (round off amounts to the nearest Rand) (5 marks) 3.1.3 The internal rate of return (IRR) (answer correct to 2 decimal places) (7 marks)3.1.4 Refer to your calculations in question 3.1 2 and state whether Cowy Traders should invest in (2 marks) Project Beef or not. Motivate your answer. 3.2 2 By the end of the third quarter of 2016, the standard cost of material for product X was as follows: 1. 4 kg per unit at R3 per kg 2. 45 000kg of material was purchased at R2, 80 for the third quarter. The actual production of product X for the third quarter of 2016 was as follows: 3. 9000 units which took 37 000 kg of material Required: Calculate the following vanances: 3.2.1 Raw material price variance [3 marks) 3.2.2 Raw material usage variance [4 marks) QUESTION FOUR 4.1 1 INFORMATION Extracts of financial statements of Sunrise Limited for 2022 are as follows:Herald Limited Statement of Comprehensive Income for the year ended 31 December 2022 R Sales (all credit) 15 400 000 Cost of sales (13 000 000) Gross profit 2 400 000 Operating expenses (1 800 000) Operating profit 600 000 Interest expense (304 000) Profit before tax 296 000 Tax (88 800) Profit after tax 207 200 Statement of Changes in Equity the year ended 31 December 2022 Dividends declared 88 000Statement of Financial Position as at 31 December 2022 R Asgets Non-current assets 1 444 000 Inventories 3 344 000 Accounts receivable 1 608 000 Cash 208 000 6 604 000 Equity and liabilities Ordinary share capital (460 000 shares) 1 840 000 Retained earnings 904 000 Long-term loan (18%) 1 700 000 Accounts payable 700 000 Other current liabilities 1 460 000 6 604 000 4.1.1 Operating margin (2 marks) 4.1.2 Turnover to net assets (2 marks) 4.1.3 Debtor collection period [2 marks) 4.1.4 Dividend per share (2 marks) 4.1.5 Retum on equity (2 marks) 4.1.6 Earnings retention ratio (2 marks) 4.1.7 Current radio (2 marks)4.2 You are required to comment on the following ratios provided for 2021 and 2022. [11 marks) 2022 2021 Return on capital employed 21.87% 16.78%% Acid test ratio 0.84:1 1.34:1 Creditor payment period 20 days 59 days