UESTION? 1. Upon returning to civilian life after several years in the Navy at Simonstown, Magda Le Grange sought a small business that she might buy. Being a thrifty person with no dependents, she had built up a fair amount of savings, the accumulation of which had been aided by the fact that she had seen considerable duty in areas where there had been nothing to buy. Le Grange nally located a small boat yard for sale on the Vaal near Vereeniging where she had spent many summers. The proprietor was getting along in years and wished to retire. He was offering the yard for sale at what Le Grange believed to be a fair starting price that could probably be worked down to a very reasonable gure through negotiation. It is not necessary here to go into the details of investigation and negotiation. Le Grange bought the yard. The business being somewhat larger than she could nance alone, she had borrowed the additional funds by mortgaging the property. Le Grange realised the need for adequate accounting records if she was to manage the business successfully. The records on hand were for cash receipts and disbursements only. Actual balance sheets and prot and loss statements that had been prepared for the former owner for tax purposes were also available. A person who was a reasonably capable bookkeeper and general office manager had been inherited with the business. Having had a course in accounting at school, Le Grange felt capable of using cost and financial information with some intelligence but did not feel capable of initiating a suitable accounting system. Knowing that you, an old friend of hers, have been studying such matters, she has asked your advice as to what kind of accounting records should be kept and what kind of financial and cost information should be developed to control operations and to make proper charges to customers for service rendered. In addition to the information above, she has told you the following facts about the business. One of the properties of the business was a large shed for the winter storage of boats. Being the most suitable building in the locality for such storage, there was great demand for space in it on the part of owners of expensive boats among the summer people. There was plenty of empty land on the shorefront for outdoor storage. In most cases where space was rented for this purpose, the yard was also hired to haul the boats in on equipment that it had for the purpose. In the spring, and from time to time during other seasons, there was a goodly amount of business available in painting and repair work on boats. There was a large-sized work-shed containing woodworking tools and space in which to construct at any one time about six boats up to 15 meters in length. Larger boats could be built outside when the weather was suitable, but Le Grange did not expect to get many, if any, orders for such craft. She did, however, always expect to have from one to six boats up to 15 meters in length in construction, some for local shermen and some for summer people. The property included a good-sized wharf and float, a store for the sale of marine hardware and supplies, and gasoline pumps. There being no yacht club in the town, the summer people who were boating minded tended to gather around this wharf and store. Le Grange intended to encourage this and to add shing tackle. sporting goods, and refreshments to the items handled by the store. Required 1. How would you recommend the purchase be effected? (i.e. what legal format she should use and why). (2 Marks) 2. In lectures we discussed the concept of Fixed Costs and Indirect Costs and how these costs are typically spread or allocated across products or activities. Why are they allocated? Give 3 methods that might be used for this. (5 Marks) 3. What would you tell Le Grange concerning her accounting and other information needs? How would she know which parts of her business were profitable or not? Consider her major cost items and discuss how they might be allocated across her products I departments? (10 Marks) 4. What would she need to contemplate as the business expanded over the next, say, ve. years? (3 Marks) For the toolbar, press ALT+F10 [PC] or ALT+FN+F10 (Mac). "Managing with Rolling Forecasts in 2021" is a new book by author John Stretch. You can find it at http://www.amazon.com/author/johnstretch