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SHORT QUESTION (ESSAY / CASE STUDY / EXERCISE) MODULE MANAGEMENT ACCOUNTING TOTAL MARKS 60 MARKS

SHORT QUESTION (ESSAY / CASE STUDY / EXERCISE)

MODULE

MANAGEMENT ACCOUNTING

TOTAL MARKS

60 MARKS

Answer ALL questions.

Question 1

[60 marks]

(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. (Round off calculations to the nearest whole number.)

(3 marks)

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