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QUESTION 4: BUDGETING Zephyr Traders opened on 1 January 2024 and sells portable power systems (PPS) that are used by the public to cope with load-shedding - NSC Accounting - Question 4 - 2024 - Paper 2
Question 4
QUESTION 4: BUDGETING Zephyr Traders opened on 1 January 2024 and sells portable power systems (PPS) that are used by the public to cope with load-shedding. This bu... show full transcript
Worked Solution & Example Answer:QUESTION 4: BUDGETING Zephyr Traders opened on 1 January 2024 and sells portable power systems (PPS) that are used by the public to cope with load-shedding - NSC Accounting - Question 4 - 2024 - Paper 2
Step 1
Complete the Debtors' Collection Schedule for June 2024.
Answer
To fill out the Debtors' Collection Schedule for June 2024, we first need to determine the credit sales for this month. According to the information provided, the total credit sales for June amount to R950,400. Considering the collection pattern, we calculate the amounts:
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For May sales collected in June (45% of May sales):
= 45 ext{%} imes R871,200 = R392,040
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For April sales collected in June (6% written off in the third month):
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Collecting 25% of June sales (this is 5% discount on 25%):
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Total cash from debtors can be summarized as:
Credit sales = R950,400 Collections = R392,040 + other amounts = R734,382.
Step 2
Calculate the amounts indicated by (i) to (iii) in the extract from the Cash Budget.
Answer
(i) To calculate cash sales for June 2024, we take 55% of total sales using:
ext{Cash sales for June} = 950,400 imes 55 ext{%} = R1,161,600
(ii) Payments to creditors are calculated as 70% of purchases. In this case, for the month we have:
ext{Payments to creditors} = 1,210,000 imes 70 ext{%} = R847,000
(iii) The hire of delivery vehicle expense for May 2024 includes an increase of 18%. Thus:
Step 3
Calculate the % increase in salaries of office workers from 1 June 2024.
Answer
To find the percentage increase, we can use the following formula:
ext{Percentage Increase} = rac{ ext{New Salary} - ext{Old Salary}}{ ext{Old Salary}} imes 100
Taking the salaries:
ext{Percentage Increase} = rac{64,480 - 62,000}{62,000} imes 100 = 4 ext{%}
Step 4
Explain how the competitor affected the sales and cash flow of the business in April 2024. Provide TWO different points, with figures.
Answer
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The competitor offered lower prices, reducing Zephyr Traders' sales significantly. Actual cash sales were R390,720 which is R577,280 (26% less than budgeted).
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The introduction of the competitor led to increased promotional activities which raised the business expenses without corresponding increases in sales.
Step 5
Explain whether Dan would be satisfied with the number of units sold in May 2024 as a result of his decision to adjust the selling price of the products. Provide TWO points, with figures.
Answer
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Although sales increased to 200 units, this was only a marginal increase from 148 units sold in April, which is disappointing given the adjustment.
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Profit margins might have been negatively affected by the decrease in mark-up from 60% to 35%, contributing to overall cash flow allegations.
Step 6
Dan is aware that not all salespersons would be satisfied with the decisions he has taken about their earnings. Salesperson John was satisfied whereas Salesperson Sally was not. Give ONE reason to support John's opinion and ONE reason to support Sally's opinion. Quote figures.
Answer
Supporting John's Opinion: John benefited from a higher commission, as his earnings increased from R1,320 per unit to R1,485, allowing him a greater income.
Supporting Sally’s Opinion: Sally expressed concerns as she had to adjust to a lower commission structure, impacting her earnings potential.
Step 7
Step 8
Explain ONE point in favour of purchasing the property and ONE point against this proposal.
Answer
In Favor of Purchasing: The owner may benefit from capital growth as property value appreciates, increasing equity over time.
Against Purchasing: The burden of ongoing fixed costs could strain cash flow, making flexibility in financial obligations more difficult.