Photo AI
You are provided with information relating to XYZ Furnishers owned by Piet Morake - NSC Accounting - Question 6 - 2017 - Paper 1
Question 6
You are provided with information relating to XYZ Furnishers owned by Piet Morake. 6.1 On 30 April 2017 Piet identified the figures below. Comment on the control of... show full transcript
Worked Solution & Example Answer:You are provided with information relating to XYZ Furnishers owned by Piet Morake - NSC Accounting - Question 6 - 2017 - Paper 1
Step 1
Comment on the control of EACH item and give ONE point of advice in each case.
Answer
Control of Telephone
The actual expenditure on telephone calls is significantly higher than the budgeted amount, indicating an over-spending issue. This may result from private calls being charged to the business, affecting efficiency and profitability.
Advice: Private calls should be monitored to prevent personal usage from impacting business costs.
Control of Staff Training
The expenditure on staff training is below the budgeted figure, suggesting that the allocated funds were not fully utilized. This could limit staff development opportunities that enhance customer service and company performance.
Advice: It’s important to prioritize staff training by possibly reallocating budget resources or planning for increased training sessions.
Step 2
Step 3
Step 4
Identify/Calculate the missing figures (i) to (vii) in the Cash Budget.
Answer
i) Cash sales: $72,000
ii) Cash purchases of stock: $20,000
iii) Delivery expenses: $10,800
iv) Salaries and wages: $36,000
v) Repayment of loan: $48,000
vi) Cash at end of month: $35,500
vii) Cash deficit for the month: $(42,800)
Step 5
Piet wants to save on costs by not offering a free delivery service. Is this a good idea? Explain.
Answer
It depends on several factors:
- The possibility of losing customers who prefer services that include delivery.
- Competitors may still provide this service, potentially driving customers away.
- Customer reaction might include dissatisfaction, leading to them switching to other suppliers.
In summary, while cost-saving is important, the implications on customer satisfaction and competitive advantage should be carefully evaluated.
Step 6
Explain ONE advantage and ONE disadvantage of EACH option.
Answer
Raise a new loan
Advantage: New equipment could potentially last longer than five years if maintained properly. Disadvantage: The company will incur high-interest costs over the loan duration.
Hire (lease) the assets from Computer Solutions
Advantage: No need to repay a full loan or to pay interest upfront, thus conserving cash flow. Disadvantage: Lease payments can accumulate over five years, possibly exceeding the purchase price of the equipment.
Ask a friend to become an equal partner
Advantage: Willingness to share financial burdens and responsibilities. Disadvantage: Potential loss of profit-sharing and control over the business decisions.