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QUESTION 6: BUDGETING The financial year-end of Carpets Galore (Pty) Ltd is 31 October 2019 - NSC Accounting - Question 6 - 2019 - Paper 1
Question 6
QUESTION 6: BUDGETING The financial year-end of Carpets Galore (Pty) Ltd is 31 October 2019. Thembi Tsomi is the sole shareholder and director. 6.1 Indicate amount... show full transcript
Worked Solution & Example Answer:QUESTION 6: BUDGETING The financial year-end of Carpets Galore (Pty) Ltd is 31 October 2019 - NSC Accounting - Question 6 - 2019 - Paper 1
Step 1
Indicate amounts in the appropriate blocks for the Cash Budget and Projected Income Statement for three months ending 31 January 2020.
Answer
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For the Cash Budget:
- Printer Purchase: R40,800 (November 2019)
- Depreciation: R680 per month for November 2019, December 2019, and January 2020
- Insurance Payment: R48,000 (January 2020)
- Loan Received: R100,000 (December 2019)
- Interest Payment: Interest on loan for January 2020 is calculated as follows: R100,000 x 12% / 12 = R1,000.
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For the Projected Income Statement:
- Depreciation: R680 for each of the three months
- Insurance: R4,000 for the month of January 2020
- Interest: R1,000 for the month of January 2020.
Step 2
Calculate the % of debtors: - Who settle their accounts in the 2nd month following the credit sales transaction month.
Answer
To calculate the percentage of debtors that settle their payments in the 2nd month, we would take: 67,500 (from the collection schedule) divided by 90,000 (total sales) calculated as:
rac{67,500}{90,000} imes 100 = 75\\%
Step 3
Step 4
6.3.1 Office workers are unhappy with the increase that Thembi gave them on 1 October 2019. Explain what she should say to them. Provide TWO points. Quote figures or a calculation.
Answer
- Thembi could explain that the increase was 20%, which is above the inflation rate, thereby ensuring that their wages keep up with the cost of living.
- She might also highlight that figures show the salary target was R11,100, and they received adjustments accordingly.
Step 5
6.3.2 Thembi's part son, Jacob, to deliver and install carpets for customers. Comment on his performance in September. Quote figures or a calculation.
Answer
In September, Jacob completed fewer meters than budgeted:
- Budgeted: 8,800 meters
- Actual: 5,000 meters
- Sales were only R380,000 while the budget was R490,000, resulting in a drop of approximately 22.4%.
Step 6
6.3.3 A new competitor commenced trading in the area on 1 September 2019. Provide figures to illustrate the impact on sales in September. - Explain THREE actions that Thembi took in October in response to the new competitor. Quote figures or a calculation.
Answer
- Compare budgeted sales to actual sales: Budgeted: R490,000 vs Actual: R380,000 gives a 22.4% decline.
- Actions taken by Thembi may include:
- Starting a promotional campaign, which costs R160,000.
- Adjusting prices to be more competitive, possibly reducing her profit margin.
- Hiring additional sales staff to increase foot traffic and customer interaction.