$\backslash$table$[[$Accounts payable,$2000000,1600000],[$Bank overdraft,$1000000,800000],[$Dividends payable,$50000,40000],[$Company tax payable,$600000,500000],[,80000,120000]]$

The financial manager of Colatonic Ltd read about the plight of the local child welfare organisation which aimed to supplement its funds by making and selling cooking bags which can slow$-$cook meals or keep food warm for long periods. The financial manager approached the board of directors who agreed that the company should assist the organisation. After discussions with the president and treasurer of the welfare organisation the following budgeted information for $2024$ was gathered to assist with trying to improve the profitability and break$-$even quantity for the year:

The fixed and variable manufacturing costs are estimated to be R$240000$ per annum and R$42$ per unit respectively. The selling price of the cooking bags will be R$120$ each. The selling and distribution costs are expected to total R$15000$ per month plus $5\%$ of sales. The administration costs are estimated at R$31000$ per month plus R$6$ per unit sold. $15000$ cooking bags are expected to be sold.

In keeping with its plans for expansion, the company is appraising the production and sale of a new designer energy drink. This would involve the acquisition of a new machine with a purchase price of R$1600000$ which is expected to have a useful life of six years and a salvage value of R$200000.$ The installation cost of the machine is R$100000.5000$ units are expected to be sold annually. The net profit is expected to be R$30$

unit. The straight$-$line method of depreciation is used by Colatonic Ltd$.$ The company's cost of capital is $16\%.$ If approved, the implementation date would be $02$ January $2025.$

QUESTION $1$

$(25$ MARKS$)$

Study the Statement of Comprehensive Income of Colatonic Ltd for $2023$ and $2022$ and answer the following questions:

$1\mathrm{.}1$ What evidence does the statement of comprehensive income for the year ended

$31$ December $2023$ provide for each of the following? $($Include calculations to support your answer.$)$

$1\mathrm{.}1\mathrm{.}1$ Increase in investment of R$400000$

$(3$ marks$)$

$1\mathrm{.}1\mathrm{.}2$ Increase in the loan balance of R$400000$

$(3$ marks$)$

$1\mathrm{.}2$ If the return on capital employed of Colatonic Ltd is greater than the interest rate on the loan how would this be interpreted by management?

$(3$ marks$)$

$1\mathrm{.}3$ Comment on the decrease in selling, general and administrative expenses.

$(2$ marks$)$

$1\mathrm{.}4$ Comment on the financial result of the company.

$(3$ marks$)$

$1\mathrm{.}5$ Suggest TWO $(2)$ ways in which the company can improve its net profit margin ratio.

$(2$ marks$)$

$1\mathrm{.}6$ What amounts would appear in the statement of cash flows for the year ended $31$ December $2023$ in respect of the following? $($Show all calculations.$)$

$1\mathrm{.}6\mathrm{.}1$ Dividends paid

$(3$ marks$)$

$1\mathrm{.}6\mathrm{.}2$ Company tax paid

$(3$ marks$)$

$1\mathrm{.}6\mathrm{.}3$ Net change in cash and cash equivalents $($Also state if it is an increase or decrease.$)$

$(3$ marks$)$