(Confidential)

COLLEGE OF ACCOUNTING SCIENCES

TEST 2: 10 MAY 2022

PAPER 3: MAC4862/NMA4862/ZMA4862
APPLIED MANAGEMENT ACCOUNTING
(40 Marks)

Time and Duration: 1 hour with 15 minutes reading time.

MORNING 11:35 – 11:50 Reading time. 15 minutes

SESSION
11:50 – 12:50 PAPER 3: MAC4862/NMA4862/ZMA4862 1 hour

FIRST EXAMINER: Ms H Huma

SECOND EXAMINERS: Ms A Ravat Ms S Mofokeng

This MAC4862/NMA4862/ZMA4862 (APPLIED MANAGEMENT ACCOYNTING) question paper

consists of 3 (three) pages and the required of 2 (two) pages. The marks allocated are 40 marks.

THE USE OF A NON-PROGRAMMABLE CALCULATOR IS PERMISSIBLE.

PLEASE NOTE:
 The test is a limited open-book test: Students are allowed to use ONE COPY of the 2021/2022
version of the SAICA Student Handbooks or any version published in one of the previous years.
 Ensure that you use the allocated time after completion of the test to scan your answer, check
that the file you would like to upload is the correct file and that it is complete. Further ensure that
you upload your answer to myUnisa timeously and make sure that the submission process is
complete since NO EMAIL OR LATE SUBMISSIONS WILL BE MARKED.
 It is your responsibility as a student to ensure that you have the necessary resources to
successfully complete the test. UNISA does not have control over load shedding and network
downtime and will therefore not be able to accommodate the remediation of these issues.
 Please ensure that you use the time allocation as stipulated i.e. 15 minutes reading time and 60
minutes writing time.
 If you are writing all five modules, please submit within the time stipulated i.e. 13:30 for the
morning session and 17:30 for the afternoon session. If you are not writing all five modules,
(writing 1 or 2 modules) please submit immediately after the 60 minutes writing time has lapsed,
you will be allocated 10 minutes to upload your script.
 This test paper remains the property of the University of South Africa.
 Please ensure that you have completed your details in full i.e. name, surname, student number,
module code of paper and test number on your script before submission.
 All tests and examinations should be answered in ENGLISH only.
.

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MAC4862/NMA4862/ZMA4862
TEST 2

PAPER 3 40 MARKS

Background information

VastShells Ltd (VSL) is a multi-divisional entity founded in 1958 and is currently listed on the
Johannesburg Stock Exchange (JSE). VSL has a 31 March financial year and comprises of three
divisions namely:
1. Consumer Brands: This division manufactures and sells branded food products to the South
African market through retail outlets. It’s product range includes canned foods, spreads, snacks
and beverages. During the 2022 financial year, the division had to recall one of its canned food
products after receiving numerous complaints from consumers experiencing nausea and vomiting
after consuming the said product.
2. Automotive: The division operates in the motor industry selling cars to the business and
individuals’ markets. It has 83 dealerships in South Africa and 3 dealerships in Namibia.
3. Clothing and apparel: This division operates a chain of retail clothing stores in South Africa,
offering a range of clothing, shoes and accessories. These merchandises are sourced from the
manufacturing capital of the World, China.

Financial information

VSL has recently appointed a new Chief Financial Officer (CFO), Mr. Jane, a qualified CA(SA) with ten
years’ experience. The previous CFO resigned as he relocated to Canada. Mr. Jane undertook an
exercise to analyse the profitability of the Consumer brands division. Below is an extract of his analysis
for the period ending 31 March:

Movements
2022 2021 2020 2021 to 2020 to
Consumer Brands Division 2022 2021
Revenue (R’000) 8 136 7 756 7 566 4,90% 2,51%
Gross profit margin (%) 27,0% 29,0% 30,0% -6,90% -3,33%
Number of sales transactions (#) 57 296 57 029 47 585 0,47% 19,85%
Basket: Revenue per transaction
(R) 142 136 159 4,41% -14,47%

Strategic Initiatives
The board of directors of VSL is considering the following two strategic initiatives to improve
performance:

Initiative 1: Automotive Division sales and marketing strategy

The Automotive division is managed by Steve Sithole (CEO). Mr. Sithole is considering developing a
new sales and marketing strategy that would involve partnering with a social media influencer to
achieve three key objectives (i) improve sales (ii) effective marketing and (iii) customer satisfaction.

The selection of the social media influencer that the division will partner with, will be made via a
streamlined application process. The Tech- Manager, Mrs Zane, will advertise the position on various
social media platforms and the advert will include an application link that will allow interested applicants
to apply formally. Some of the information required from applicants include name, identity numbers,
home address or postal address, and tagged viewership on Instagram and/or YouTube per annum.
Mrs Zane will import each of the applicants’ data into an excel spreadsheet for presentation to the
selection committee.

Mrs Zane’s teenage daughter, overheard her mum discussing the Automotive division’s new strategy
with her colleagues, while working from home, and asked her mum if she could look at the applicant’s
data as this information can assist her with a school Economic and Management Sciences project.
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MAC4862/NMA4862/ZMA4862
TEST 2

Initiative 2: Clothing and Apparel’s Division acquisition strategy

The Financial Manager of this division has identified FastTrack (Pty) Ltd (FastTrack) for potential
acquisition. FastTrack is a clothing manufacturing company based in KwaZulu Natal. The company is
family-owned and focuses on cut and sew apparel manufacturing customising garments from raw
fabric.

The following represents FastTrack’s forecasted net profit for the period ended 31 March:

Notes Forecast
2023 2024 2025
R’000 R’000 R’000
Net profit after tax 5 945 6 041 7 314

Notes:
 Machines replacement: FastTrack is embracing new technology and 4IR development,
consequently they are planning on replacing 50 of its, fully depreciated, manual machines with
automatic machines. The change is expected to take place in the 2024 financial year and the
automatic machines will be rented at a fixed annual fee of R5,25 million. The manual machines
disposal values and costs are negligible. The impact of the change will be a reduction of employee
costs by R7,5 million per annum. Additionally, replacing the machines will result in retrenchment
costs of R2,5 million, which are fully tax deductible in the tax year incurred. The relevant discussion
with unions and the bargaining council is in progress. None of the manual machines replacement
related transactions are accounted for in the above forecasted net profit.

 Depreciation: The following represents the forecast depreciation charge correctly accounted for in
the estimation of profit for the year:
2023 2024 2025
Details
R’000 R’000 R’000
Depreciation 2 732 3 483 5 718

 FastTrack’s depreciation charge approximates the wear and tear allowance provided by SARS.
 FastTrack’s finance costs relate to a long-term loan of R30 million obtained on 1 April 2017 from
GnB commercial bank. The interest rate on the loan is 2% above the Johannesburg InterBank
Lending Rate (JIBAR) and has been correctly accounted for in the estimation of profit for the year
forecasts. Interest quotes recently received from other banks, for a similar loan, were approximately
1,75% above the JIBAR. Interest on this loan is calculated and compounded annually in arrears,
then capitalised into the outstanding loan balance. The loan is repayable in a single bullet payment
on 31 March 2025. FastTrack does not have short-term loans or surplus cash. The interest to be
incurred on the loan will be deductible for taxation purposes in terms of Section 24J of the Income
Tax Act.
 FastTrack’s target debt to equity ratio is 63%.
 FastTrack earned revenue of R13 767 000 in 2022 and revenue is expected to grow at 10% per
annum. Working capital requirements are expected to amount to 8% of the expected revenue.
 FastTrack’s cost of equity approximates 15% per annum.
 FastTrack anticipates free cash flows to grow at a constant rate of 3,35% per annum after 2025.

Additional information:
 The inflation rate is 4,48%.
 The South African corporate income tax rate is 27,00% and is expected to remain for the
foreseeable future.
 The Johannesburg Inter-Bank Lending Rate (JIBAR) is 4,20%

©
UNISA 2022
 TEST 2: 10/05/2022

MAC4862/NMA4862/ZMA4862
APPLIED MANAGEMENT ACCOUNTING

REQUIRED

This is the REQUIRED part of MAC4862/NMA482/ZMA4862 and consists of two (2) pages, including
this cover page.

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MAC4862/NMA4862/ZMA4862
TEST 2

REQUIRED MARKS
Sub- Total
total
(a)
Prepare a memorandum to the CFO in which you evaluate the Consumer
Brands division’s trading performance.
7
8
You are not required to perform any calculations

Communication: layout and presentation 1

(b) (i) Calculate the value of 85% equity shareholding in FastTrack as at 31 March
2022, using a free cash flow method of valuation.
18
Round all calculations to R’000.

(ii) Discuss the key strategic considerations to be made, by the executive 7 26

management of VSL, prior to acquiring FastTrack.

Communication: logical argument 1

(c)
(i) Discuss whether it would be appropriate for Mrs Zane to share the data
gathered on the social media influencers with her daughter. 3

(ii) Advise Mrs Zane regarding the measures that could be implemented to 6

ensure that the social media influencers data is collected and stored in a
3
secure manner.

TOTAL 40

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UNISA 2022