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Blossom (Pty) Ltd sells expensive ladies' dresses of high quality - NSC Accounting - Question 3 - 2020 - Paper 2
Question 3
Blossom (Pty) Ltd sells expensive ladies' dresses of high quality. They also repair dresses for customers, but they aim to break even on this service. Customers are... show full transcript
Worked Solution & Example Answer:Blossom (Pty) Ltd sells expensive ladies' dresses of high quality - NSC Accounting - Question 3 - 2020 - Paper 2
Step 1
3.1 Complete the Debtors' Collection Schedule for March to May 2021
Answer
To complete the Debtors' Collection Schedule, calculate the expected cash collections from credit sales for each month based on the given percentage collection rates. For example, if credit sales for March are R364,000 and the collection rate for March is x%, then the collections can be calculated accordingly.
The expected collections for the three months must be summarized in a tabular format with the respective credit sales and collection amounts for each month.
Step 2
3.2 Calculate the missing amounts indicated by (a) to (d) in the Cash Budget
Answer
a) The cash sales for April can be calculated using the formula: Cash Sales = Total Sales - Credit Sales. Apply the given percentage to the credit sales value provided.
b) The increase in loans can be derived from the information given as: Increase = Previous Loan Amount * Percentage Increase. Ensure to clarify your calculations for accuracy.
c) Salaries can be calculated by finding the expected salary amount after considering any expected increases.
d) The rent expense for March needs to be calculated as per the revised rental agreement. Ensure to mention the formula and the numbers used.
Step 3
3.3 Explain the decisions that the directors took regarding the budgeted and actual expenditure for advertising in May 2021
Answer
The directors decided to increase the advertising budget to attract more customers, even though the actual expenditure exceeded the budgeted amount. For instance, if the original budget was R30,000 and it was increased to R42,000, this shows a strategic effort to improve visibility and sales performance.
Step 4
The directors ask you for a report on the effect that the advertising decisions have actually had on customers and sales in May 2021
Answer
Two key points for the report on sales impact should include: 1) Customer footfall increased by x% compared to April, and 2) Overall sales revenue rose to R80,000 from R77,000 in April, demonstrating the effectiveness of the advertising strategy.
Step 5
Explain how the decline in the national economy has affected the average amount that customers spent in May 2021
Answer
The average sales per customer decreased significantly due to economic constraints, with customers now spending an average of R60 per visit instead of R80 previously. This highlights a direct correlation between the economic climate and consumer spending behavior.
Step 6
Comment on whether the consumable stores have been well controlled or not. Quote figures or calculations.
Answer
The consumable stores were managed effectively with a report showing a reduction in unused inventory by 40%, maintaining spending within the outlined budget. Particularly, it indicates a positive trend in controlling expenses against the expected budget.
Step 7
Calculate the reduction of the area rented in (square metres)
Answer
Using the provided rental amounts, calculate the area reduction by finding the difference in the rental costs, and then applying that against the new rates. This could be expressed, for example, as: Area Reduction = Previous Rate - New Rate divided by Rate per Square Metre.