The following information was extracted from the financial records of LDQ Ltd:

Extract of the Statement of Financial Position as at $31$ May $2022$

ASSETS Note R

Non$-$current assets $2000000$

Property, plant and equipment $11600000$

Fixed deposit $(5\%$ p$.$a$)400000$

Current Assets $?$

Inventories $2800000$

Accounts receivable $?$

Cash and cash equivalents $50000$

$5400000$

EQUITY AND LIABILITIES

Equity $?$

Ordinary share capital $2800000$

Retained earnings $?$

Non$-$current liabilities: Loan $(18\%$ p$.$a$)700000$

Current liabilities: Accounts payable $800000$

$?$

NOTE:

$1.$ Property, plant and equipment comprise the following:

Vehicles Equipment

Cost $17000002300000$

Accumulated depreciation $(200000)(2200000)$

Required:

$2\mathrm{.}1$ Calculate the following amounts:

$2\mathrm{.}1\mathrm{.}1$ The amount owing to the company for credit sales. $(2)$

$2\mathrm{.}1\mathrm{.}2$ Retained earnings. $(2)$

$2\mathrm{.}2$ Explain how the following accounting concepts apply to the preparation of the company$$s

financial statements:

$2\mathrm{.}2\mathrm{.}1$ Full disclosure $(2)$

$2\mathrm{.}2\mathrm{.}2$ Going concern $(2)$

$2\mathrm{.}3$ State your observations and recommendations with regard to the following:

$2\mathrm{.}3\mathrm{.}1$ Property, plant and equipment $(4)$

$2\mathrm{.}3\mathrm{.}2$ Fixed deposit $(4)$

$2\mathrm{.}3\mathrm{.}3$ Inventories $(4)$

QUESTION THREE $[25]$

Tudle Ltd manufactures a product that sells for R$30$ per unit. Marginal $($Variable$)$ costs to manufacture

and sell are R$16$ per unit. Fixed costs and expenses are budgeted at a total of R $54600$ per year.

Required:

$3\mathrm{.}1$ Analyse the meaning of the term contribution margin. $(4)$

$3\mathrm{.}2$ Calculate the break$-$even value in Rands. $(4)$

$3\mathrm{.}3$ Calculate the income to be expected on sales of R$240000.(4)$

$3\mathrm{.}4$ Calculate the sales revenue required to produce net income of R$7000.(4)$

$3\mathrm{.}5$ If fixed costs were to be increased by R $25760,$ calculate the increase in sales revenue that

would be required to cover the increase in fixed costs. $(5)$

$3\mathrm{.}6$ If the selling price is decreased by $20\%,$ what percentage increase in the number of units sold

is necessary to offset this decrease in selling price. $(4)$

QUESTION FOUR $[25]$

Zaini Ltd uses the standard costing system and manufactures a single product. The standards per

month for this product are as follows:

Material $4$ kilograms at R$2\mathrm{.}50$ per kilogram

Labour $4$ hours at R$100$ per hour

Variable overheads R$40$ per labour hour

Fixed overheads R$48000$

Production $24000$ units per month

Actual results for the latest month were as follows:

Material $81000$ kilograms used at R$2\mathrm{.}50$ per kg

Labour $78000$ hours worked at R$96$ per hour

Variable overheads R$44$ per labour hour

Fixed overheads R$53000$

Production $20000$ units

Required:

$4\mathrm{.}1$ Calculate and state whether the following variances are favourable $/$ unfavourable:

$4\mathrm{.}1\mathrm{.}1$ Raw material usage variance. $(5)$

$4\mathrm{.}1\mathrm{.}2$ Fixed overhead spending variance. $(5)$

$4\mathrm{.}1\mathrm{.}3$ Variable overhead efficiency variance. $(5)$

$4\mathrm{.}2$ Analyse the underlying causes for variances. $(5)$

$4\mathrm{.}3$ Evaluate the merits of budgeting. $(5)$