Donald May owns Breezy Traders that sell air-conditioner units - NSC Accounting - Question 6 - 2018 - Paper 1
Question 6
Donald May owns Breezy Traders that sell air-conditioner units. The budget period ends on 31 October 2018.
6.1 Complete the Debtors' Collection Schedule for October... show full transcript
Worked Solution & Example Answer:Donald May owns Breezy Traders that sell air-conditioner units - NSC Accounting - Question 6 - 2018 - Paper 1
Step 1
Complete the Debtors' Collection Schedule for October 2018.
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Answer
The Debtors' Collection Schedule for October 2018 is completed as follows:
For July: 81,312
For August: 48,568
For September: 221,760
For October: 79,800
Thus:
Total for October = 369,340 + 386,128.
Step 2
Calculate the amounts indicated by (i) in the extract from the Cash Budget.
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Answer
The cash sales for September can be calculated as follows:
Given cash sales comprise 60% of total sales:
ext{Total Sales} = rac{603200}{0.6} = 1005333.33
Thus, the cash sales for September is 603200.
Step 3
Calculate the amounts indicated by (ii) in the extract from the Cash Budget.
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The rent income for October should be calculated as follows:
Given the 9% increase in rent income:
extRentIncomeforOctober=25600x1.09=27840
Thus, the rent income for October is 27840.
Step 4
Calculate the amounts indicated by (iii) in the extract from the Cash Budget.
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Answer
For payments to creditors in October:
ext{Payments} = rac{288000}{0.5} = 576000
Hence, the payments to creditors in October is 288000.
Step 5
Calculate the % increase in salaries of sales assistants for October 2018.
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To calculate the percentage increase in salaries of sales assistants:
Explain whether the sales assistants should be satisfied with this increase.
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The sales assistants should be satisfied with a 10.5% increase. This increase is fair and exceeds the current inflation rate. In comparison to the 25% increase in salaries of sales staff, they might feel disappointed, yet still find this increase reasonable overall.
Step 7
Explain the effect of the new competitor on any TWO items in the budget for September.
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Answer
Total sales decreased from R1 008 000 to R840 000 (R168 000 drop).
Cash sales were below budget, reducing from R604 800 to R336 000, resulting in a decrease of R403 200.
Step 8
Identify TWO changes Donald implemented in October in response to the new competitor.
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Increased cash purchases from R403 000 to R252 200 to improve stock availability.
Increased delivery from R672 200 by R558 240 to offer more timely service.
Step 9
Explain why Donald feels that his decisions were successful.
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Donald feels successful because:
Sales of air-conditioners exceeded budget by 50 units (300 - 250).
Cash surplus exceeded budget, indicating better financial management and response to market needs.
