SHORT QUESTION (ESSAY / CASE STUDY / EXERCISE)

MODULE MANAGEMENT ACCOUNTING

TOTAL MARKS 60 MARKS

Answer ALL questions. [60 marks]

Question 1 (20 marks)

1. The following transactions of Fernglen Limited, a manufacturer of children’s’ tables and chairs
took place during April 2017.

APRIL
01 Stock on hand 600 units @ R220 per unit
03 Issued to production 350 units
08 Returned from production to stores 50 units
17 Purchased from supplier 2000 units @ R230 per unit
20 Issued to production 800 units
21 Returned to supplier (purchased on 17 April 200 units
2017)
30 Issued to production 800 units

1.1 Determine the value of closing inventory based on the First-in-first-out (FIFO) method.
(13 marks)

1.2 Ricey Wholesalers sells 8 000 bags of rice each year. The inventory holding cost of one bag
of rice is R5. The cost of placing an order for stock is estimated at R160.

1.2.1 Calculate the EOQ. (4 marks)

1.2.2 Calculate the number of orders that should be placed per annum. (3 marks)
(Round off calculations to the nearest whole number.)
Question 2 (20 marks)

The information provided below relates to Prague Enterprises.

1. The bank balance on 31 May 2018 was R9 000 unfavourable.

2. Actual and budgeted sales are as follows:

MONTH AMOUNT
May 2018 R440 000
June 2018 R400 000
July 2018 R480 000

Cash sales are estimated at 10% of total sales.

Debtors are expected to settle their accounts as follows:

- 70% during the month of sale (These debtors receive a 5% discount.)

- 30% in the following month.

3. Actual and budgeted purchases for each month are as follows:

MONTH AMOUNT
May 2016 R240 000
June 2016 R200 000
July 2016 R220 000

Fifty percent (50%) of all purchases are for cash. Creditors are paid in full in the month following
the purchase transaction.

4. Rent expense amounts to R19 000 per month, payable monthly. Rent will increase by 10% from
01 July 2016.

5. Variable selling and administrative expenses are estimated at 25% of sales. They are payable
during the month of sale.

6. Insurance amounts to R72 000 per annum payable monthly.

Required

2.1 Prepare a Debtors collection schedule for June and July 2018. (6 marks)

2.2 Prepare the Cash Budget for June and July 2018. (14 marks)
Question 3 (20 marks)
Moon (Ltd) manufacture specially treated garden benches. The following information was extracted from
the budget for the year ended 29 February 2016:

Estimated sales for the financial year 2 000 units

Selling price per garden bench R450
Variable production cost per garden bench:
- Direct material R135
- Direct labour R90
- Overheads R45
Fixed production overheads R127 500
Selling and administrative expenses:
- Salary of sales manager for the year R75 000
- Sales commission 10% of sales

Required: (round off answers to the nearest rand or whole number)

3.1 Calculate the break-even quantity. (4 marks)

3.2 Determine the break-even value using the marginal income ratio. (4 marks)

3.3 Calculate the margin of safety (in Rand terms). (4 marks)

3.4 Determine the number of sales units required to make a profit of R150 000. (3 marks)

3.5 Suppose Moon (Ltd) wants to make provision for a 10% increase in fixed production
costs and an increase in variable overhead costs of R15 per unit.
Calculate the new break-even quantity. (5 marks)

END OF PAPER