QUESTION 4 (20 Marks) REQUIRED: 1.1 Prepare the projected statement of financial poston forthe year ended 31 December 2020 for [Anglo Limited. (16 marks) 1.2Discuss some of the consequences of overestimating sales when drawing up the sales budget. (mats) INFORMATION ‘Ango Limited Statement of fnancial position for he year ended 31 December 2019 R ASSETS Non-current assets 2200 000 Foreditangible assets [2mm] Current assets 1454 000 Inventories Trade and ofier receivables ‘Cash and cash equivalents EQUITY AND LIABILITIES ‘Shareholders’ equity 2-244 000 Onna sha canal Retaned earings ‘Non-current li 660 000 Low tenon Current Habiities 750,000 Trade and other payabes ‘Adcitional information: Sales for 2019 was R2 200 000 and sales for 2020 is forecast to be R2 400 000 The percentage of sales is used to determina the folloning balances: © Inventories co Trade and other receivables, © Trade and other payables Anew deivery vehicle costing R320 000 will be purchased in 2020. Total depreciation in 2020 willbe R280 000. There willbe no change in notes payable and share capital Dividends of R90 000 wil be paid in 2020, The business predicts a net profit margin of 8% for 2020. ‘An amount of R80 000 will be repaid for the long term loan + Cash and cash equivalents must be determined.‘QUESTION 2 (20 Marks) ‘Chemco Lid, a cherricel manufacturing company, & considerng replacing one of Is chemical precesshg equipment that has reached the endof ts usefu fe, Two atematives are curenty being considered Equipment A can be purchased for RE500000 which excludes transpor. and instalaion costs of R50 000 to bring the ‘equipment oa state of production, This equipment wihave a usefullife of four years and willhave no scrap value ater four years. All equipment is deprecated on the straight tne basis. ‘The expected net cash inflows fom the sale of units produced by Equigment Ai as follows Year 4 Year 2 Year3 Year 4 Nel cash intow pr itre R190 2.00 R215 2.22 No of tres 400.000 705 000 712.000. 420 006. Ecquipment 8 can be purchased for R600 000 and willhave a useful fe of 4 years, after which itis expacted to be disposed Of at ls sorap value of R40 0C0. The net cash revenue from the sale of production related to Equipment 8 is 100 000 ites ‘sod for a flat price of R80 over each of the four years Itis the company's policy to reject any capital projects that have a payback period of more than three years ‘The intemal rate of etum for Equipment Ais 17.66% and for equipment Bis 9.84% The company's cost of capita is 12%. ‘The francial director has requested you to advise the capital expenditure commitee on which equipment will he most feasible to purchase. REQUIRED: Prepare a report to he capital expenditure committe in which you evaluate the two options and meke a recommendation ‘onthe option t be chosen. Your repor should include all workings showing the eppicaton of reevantcapital expendture techniques thet you have used in caming o your decision. QUESTION 3 (20 Marks) REQUIRED: Prepare the Cash flow statement of Carrer Enterprises for the year ending 31 December 2020. INFORMATION ‘The folowing extracts ofthe financial statements of Cartier Enterprises were presented fo you Statement of Comprehensive Income for the year ending 31 December 2020: R Sales 1200 000 Cost of sales (572000) Gross profit 625 000 Operating expenses (2100) Operating profit 3000) interest expense (9500) Profit before tax 251 500 Taxaton (82460) Profit after tex Dividends paid (#20007 Profit after tax TOWStatement of Financial Position as at 31 December: 2020 2019 411000 | 319 000 Current assets 431 790 285 000 Teeny Debtors 115 000. Bank 217 790 842 790 605 000 CUTTY ANS TABTTES Ono Eaty arraua—| sur o08 Ordinary Shares 175.000 175 000 Retained Eamings 496 040 325 000 ‘Non-Current Liabilities 90.000 30 000 Devens 2% Current Liabilities 81750 74000 Trade creditors 81750, 74000 42790 _| 605000 ‘Adcitional information: ‘= No non-current assets were sold during the year. ‘+ Depreciation of R42 000s included in operating expenses for 2020,‘QUESTION 4 (20 Marks) 4s ‘Guce Enterprses makes handtiags, The fixed costs of operating the workshop for a month total R5 000. Each nandtiag requites matefal thet cost RZD. Each handbag takes 2 hours to make, and the business pays the handbag makers R1250 an hour, The bag makers are allon contract and f they do not work for any reason, fey are rot paid, Each Kandbag sold to fachion stores at R70, The business execs io soll 350 handbags per month ‘The busness is considering fo rent a bag makhg machne, Doing so woud hrease the total fxed costs of operating the ‘workshop fora month to R9 375: Using the machine will reduce the labour tie to 1 hour for each handbag. The handtag makers latout rate wll remain unchanged REQUIRED: 4.1.4 Would you advise the business to rent the machine if you consier the etfect on operating profit? (10 marks) 4.1.2 Would yourresponse in 4.1 be any dtferentif you considered the breakeven quantty and margin of safety of both ortions? 6 maks) 42 Fumeratt Manufacturers manufacture lunge suites that sell for R3 000 persue. Thay have the same basic design but may vary te fabric coverings. thas the capac to produce 1 400 lounge suites each month although production very ‘seldom exceeds 1 000 per month, The sales manager received a request rom a cut price discounter (ath many branches) who made an offer to buy 300 lounge suites at R2 400 per suit, The latest monthly figures reveal aseling price per unit of R3 O00 and varable costs of R1 80D per unit with a Volume of $00 units. Fixed costs amounted 1 R810 COO. REQUIRED ‘Would you advise the sales manager lo acceptor reject the offe? Substantiate your answer (6 maks)(QUESTION 5 (20 Marks) 54 REQUIRED Use the information provided below to calslate the cost of sales and gross profit for the year ended December 2019 Using the following methods of inventory valuation: 51.1 FIFO (S marks) 51.2 Weighted average cost. (Round off the weighted average cost per unitto the nearest cent) (6 marks) Note: Use the format ofthe statement of comprehensive income to present your answer, INFORMATION ‘arin Stationers, a stationery store, had the folowing inventory of math sets on O7 January 2079, the start of the financial year 20 units at R40 each purchased on 30 November 2018 During 2049 the following transactions were recorded: 00 units at R45 each were purchased on 20 January 2019. 150 units at REO each were purchased on 31 May 2019, £80 units at RSS were purchased on 30 November 2019, 400 math sets were sold at R8O each during 2018 52 REQUIRED Calculate the economic order quantiy (EOQ) for 2020 from the information provided below. (6 marks) INFORMATION ‘The monthly usage of an tem during 2020 is estimated at 800 units. The budgeted costs are as follows: The cost per unit is R12. The ordering cost amounts to R10 per order and the holding cost per unitis equal to 10% ofthe unit cost of the item, 83 REQUIRED Use the information given below to determine the cost (as a percentage) to Super Traders of not accepting the discount (6 marks) INFORMATION Walton Wholesalers’ usual credit terms to Super Traders are 30 days but the supplier is prepared to alow a 2.5% rebate ifthe account is settled within 10 days.‘QUESTION 6 (20 Marks) 6 INFORMATION Premier International Limited expects to sell 3 000 desk fans aia pice of R900 per urit. The costo manufacture each fan is R200. I fe sales are made on credit, cofecton costs of approximately RS Fer unt soldwil be incurred. The cost of capital to the company is 12%, REQUIRED: Calculate the proft to Premier Intemational Limited f: 6.1.1 Allsales are for cash (2 mas) 6.1.2,llthe sales are on cred and the aocounts are paid in 60 days (4 mas) 6:1.3,llthe sales are on credt and a 5% discount is granted ifthe accounts are pad in 20 days. Suppose that 50% of ‘customers pay thelr accounts within 20 days, (6 maks) 62 'Moondrops Manuiaclurers nas annual sales of 22 200 000, cast of sales of R400 000, inventory of R330.000 and acoounts receivable of R410 000, Allsales are on credit. Accounts payable are R340 000 end creditpurchases amountto R1 400 000. REQUIRED: 6.2.4 Calculate and oorment on the operating cycle (4marks) {6.2.2 Evaluate the cash conversion cycle of Moondrops Manufacturers and suggest ways in which this can be improved. (4marks)