SECTION D: INTERPRETATIVE QUESTIONS

$(20$ MARKS$)$

ANSWER ANY ONE OF THE QUESTIONS

QUESTION $1$

A toy manufacturer makes and sells shoes. During the production process there are certain accounting entries that need to be made to record the manufacturing process.

REQUIRED

$($a$)$ Purchases of direct and indirect material

$($b$)$ Issues of direct and indirect material

$($c$)$ Recording direct and indirect material

$($d$)$ Payment of wages

$($e$)$ Recording of overheads

$($f$)$ Allocation of overheads

$($g$)$ Completed jobs transferred

$($h$)$ Recording of cost of sales

$($i$)$ Recording of under$-$recovered overheads

$[20]$

OR

QUESTION $2$

Mr Mendini has identified a gap in the market for providing recording devices. He has done a market survey, and has found the sales potential to be promising. He has R$200000$ to invest in a business, but he is concerned that he may need more cash, in which case he will have to apply for a bank overdraft. He has asked you to assist him with the preparation of a cash budget for the first two months of trading. He has provided you with the following expected figures:

$\backslash$table$[[,$March,April$],[$Sales$,220000,245000],[$Purchases$,115000,123000],[$Fixed expenses,$35000,35000],[$Bad debts,$2200,2450]]$

QINTEC COLLEGE NOVEMBER $2019$

PAGE $11$ OF $12$

COST AND MANAGEMENT ACCOUNTING $1$

Additional information

All sales are on credit, and cash is expected to be collected as follows:

$50\%$ in the same month of sales

$40\%$ first month after the month of sale

$10\%$ two months after the month of sale

Purchases are paid for in the month the expenses are incurred.

Fixed expenses include rent, wages and water and electricity.

Jason wishes to withdraw R$13500$ per month from the business for his personal use.

Advertising will cost R$8500$ in the first month, and thereafter be $5\%$ of sales, payable in the month the expense is incurred.

Commission of $2\%$ on sales is paid in the month in which it is incurred. Commission is only paid where sales exceed R$225000.$

Mr Mendini will deposit his capital contribution into the business's bank account when the business commences trading in March.

He plans to purchase special equipment costing R$95000$ in April.

REQUIRED:

Draft a cash budget in columnar format for March and April $2019.$

$[20]$