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PAPER TWO TOPICS

SOLUTIONS ENGLISH

ACCOUNTING GRADE 12

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Topics Page
1 Management of Tangible Assets 3-6

2 Manufacturing Accounts 7-15

3 Reconciliations Bank 16-32

Creditors
Debtors and Debtors Age Analysis
4 VAT 33-36

Inventory Valuation: FIFO 37-45

5 Weighted Average
Specific Identification
6 Budgeting 46-55

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MANAGEMENT OF TANGIBLE ASSETS

ACTIVITY 1 NSC NOV 2018

TANGIBLE ASSETS

21 MARKS

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ACTIVITY 2 NSC NOV 2017

FIXED ASSETS 21 Marks

3.1
(a) Calculate the carrying value of Land and Buildings on 1 March 2016.

2 550 000 – 325 000 = 2 225 000  no part marks 2

(b) Calculate the total depreciation on vehicles on 28 February 2017.
Allocate the marks to correct workings even if subtotals not shown.

New:
422 550 x 20/100 x 6/12 = 42 255 

Old: one mark

350 000 x 20/100 = 70 000 but can only write off R34 999 
(350 000 – 315 000) = 35 000–1 = 34 999
42 255 + 34 999 = 77 254  one part correct 6
(c) Calculate the carrying value of Vehicles on 28 February 2017.
Note: Apply Marking Principle10
Mark one line only – choose line to benefit candidate

see (b) above one part correct

35 000  + 422 550  – 77 254  = 380 296 

OR
one mark one mark one method mark one method mark
772 550 – (315 000 + 77 254 see (b) above = 380 296
392 254 two marks
4
(d) Calculate the carrying value of Equipment sold on 31 December 2016.
Note: Apply Marking Principle10
Mark one line only – choose line to benefit candidate

30 900 four marks 18 900 three marks

22 800 two marks
120 000  – (12 000 + 10 800  + 8 100 ) = 89 100  one part correct
108 000 two marks

OR
one mark one mark one mark two marks one method mark
120 000 – 12 000 – 10 800 – 8 100 = 89 100
6
(e) Calculate the total carrying value of fixed assets on 28 February 2017.
Note: Apply Marking Principle10

see (c) above one part correct

2 550 000  + 380 296  + 50 994  = 2 981 290 
4

22 MARKS
ACTIVITY 3 NSC FEB 2018

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TANGIBLE ASSETS

15 MARKS

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ACTIVITY 4 NSC FEB 2015

TANGIBLE ASSETS

4.2 Calculate the missing amounts (indicated by a, b, c and d) in the

Fixed/Tangible Asset Note for the year ended 31 October 2014.

Workings Amount
a 3 000 000 – 2 500 000 500 000 
b 660 000 x 20% 132 000 
c 660 000 – (b) – 446 000 82 000   one part correct
OR 150 000 – 68 000
d 157 500 + 48 000 -55 000 150 000 
OR 258 000 – 108 000 9

ACTIVITY 5 NSC FEB 2016

6. MANAGEMENT OF FIXED ASSETS
2

Identify ONE problem regarding each vehicle/driver. Quote figures to support your
answers. Give Kobus ONE point of advice for EACH problem identified.
Problem with figures Advice
Problem      
Figures   
Leroy was absent for 8 days./ He is Investigate the reason for his
Vehicle 1 the highest paid driver, R8 000 where absence./Only pay for the
(Leroy) other drivers earn R5 000. number of days at work.
Fred is travelling too many kilometres (4 Possible disciplinary action
600 km for 80 trips = 58 km per trip) against Fred for unauthorised
which is higher than the maximum of 40 use of vehicle./Improve
Vehicle 2 km per customer./He is travelling more internal control over the use
(Fred) km than Bheki (4 200 compared to 2 of the vehicles.
800 km) but doing fewer trips (70
compared to 110).
Bheki is doing the most number of trips Consider replacing this
Vehicle 3 (120) but his vehicle is the oldest and vehicle as it is expensive to
(Bheki) the most expensive to run (R0, 81 per maintain.
km).

9 MARKS
MANUFACTURING ACCOUNTS

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ACTIVITY 1 NSC NOV 2019

MANUFACTURING

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ACTIVITY 2 NSC NOV 2018

MANUFACTURING

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ACTIVITY 3 NSC NOV 2017

2.1 GEVEN MANUFACTURERS

2.1.1 PRODUCTION COST STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 2017
Direct material cost (1 050 000 + 102 000)  1 152 000
Direct labour cost Prime cost – DMC  648 000
Prime cost  1 800 000
(– 84 000 one mark +100 800 one
mark)  504 000
operation; one part correct
Factory overhead cost (487 200 + 16 800)
FOHC
operation Prime +  2 304 000
Work-in process (beginning)  160 000
2 464 000
Work-in process (end) operation TCP – subtotal
above
Check that is deducted; ignore brackets
 (88 000)
do not accept 160 000 or 0
Total cost of production 7 200 x R330 No part marks  2 376 000
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2.1.2 ABRIDGED INCOME STATEMENT

FOR YEAR ENDED 28 FEBRUARY 2017

Sales  4 080 000

See TCP 2.1.1 400 x R330
Cost of sales (336 000 + 2 376 000  – 132 000 )
OR 8 000–1 200 no part marks  (2 580 000)
(1 200 x R280) + (6 800 x R330) Could do FGS account Ignore brackets
one mark two marks one mark

Gross profit Sales – COS  1 500 000

20% x 126 000
126 000–100 800  (131 600)
(– 42 000 + 25 200 one method mark) one part correct
Ignore brackets
Administration cost (148 400 – 16 800  see 2.1.1)
Selling and distribution cost (422 000 – 102 000)  (320 000)
One part correct Ignore brackets
Net profit operation (subtract AC & SDC) one part correct  1 048 400

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2.2 GYMWEAR MANUFACTURERS

2.2.1 Shirts:
Calculate the break-even point for shirts.
64 two marks
530 000 ÷ (302 – 238) = 8 281,25 / 8 282 / 8 281 / 8281,3
    one part correct; do not accept R or c
4
Identify ONE variable cost (with figures) that has not been well
controlled. Give TWO possible reasons for this problem.

ONE VARIABLE
COST WITH FIGURES REASONS
 
Variable cost  Any two different reasons
Figures 
Expected responses:
 Negotiated wage increase / applied minimum
wage / inflation / increased salary scales (for
qualifications)
 Paid bonuses to some workers
 Excessive overtime
Direct labour cost
 Lack of productivity (inefficiency) of workers
Increased by R31  Inexperienced / poorly trained workers
(31%)  High staff turnover rate
(from R100 to R131)  Old equipment affects productivity
 Work hours lost due to training time (workers paid
for training) / due to load-shedding (power-cuts) /
due to paid sick leave
 Errors in calculation of wages (over-paid)
Do not accept: More workers; Absent workers; Poor budgeting
4
Explain why Jan might be concerned about the large decreases in the
other TWO variable costs.
Explanations on the two State or imply what the
VC’s concern is  
 
Using cheaper material Inferior quality.
Comment
Economising on material May affect the quality of the
on DMC
product
Reduced advertising or May cause sales to drop / may
reduced commission / demotivate salespersons
reduced remuneration of
salespersons
Comment Reduced distances for Leads to loss of customers
on S&DC deliveries / discontinuing the
service in certain areas
Out-sourcing / using Might be inferior and
cheaper service providers negatively affect business in
future
4

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Jan does not understand why the unit cost of production has increased
when neither his fixed costs nor the variable costs have increased.
Explain why this is so. State ONE point (with figures).
Any one explanation  Figures 
Expected responses: Part-marks for unclear/incomplete explanation
 No economies of scale / decrease in production by 8 900 units (25 000 to 16 100)
 Lower production increased FC per unit by R11,72 or 55,2% (R21,20 to R32,92) 4

2.2.2 Shoes:

Calculate the % increase in the selling price of shoes.

1 640–1 260
380  x 100 OR 130,2% -100%= 30,2%
1 260  1

= 30,2%  one part correct; accept 30% or 30,15%; % sign not needed 3
Jan decided to improve the quality of the shoes and to export them.
Explain how the direct material costs and the selling and distribution
costs were affected by this decision. Provide figures.

 DMC increased from R330 to R456 (by R126/by 38%/38,2%) 

 S&DC increased from R28 to R194 (by R166/by 593%/592,8%) 4
Jan was concerned that the increase in price would have a negative
impact on the business. Explain whether his concern was justified. State
TWO points.
Figures are not needed, but may be used to make a point about the concern.

Reasons (any two)   State NO concern OR imply NO concern

in explanation or by using figures  
 Sales increased (by 1 250 units) / customers still supported the
business (despite increase in price)
 Net profit increased (by R1 196 750) / price did not negatively affect
sales)
 BEP decreased (due to increased contribution per unit) by 475
units / The business now exceeds BEP by bigger margin (3 908
units). 4

TOTAL MARKS
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ACTIVITY 4 NSC FEB 2018

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RECONCILIATIONS

ACTIVITY 1 NSC 2019, QUESTION 2

BANK RECONCILIATION 30 MARK

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ACTIVITY 2 ASC 2019

BANK RECONCILIATION 20 MARKS

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ACTIVITY 3 ASC 2018

BANK RECONCILIATION 35 MARKS

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ACTIVITY 4 NSC 2017

BANK RECONCILIATION 30 MARKS

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ACTIVITY 1 NSC 2018

CREDITORS’ RECONCILIATION 21 MARKS

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ACTIVITY 2 ASC 2016

CREDITORS’ RECONCILIATION 18 MARKS

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ACTIVITY 3 FEB/MAR 2016

CREDITORS’ RECONCILIATION 30 MARKS

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ACTIVITY 1 ASC 2017

DEBTORS RECONCILIATION 16 MARKS

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ACTIVITY 2 NSC 2016

DEBTORS RECONCILIATION 30 MARKS

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ACTIVITY 3 KZN PRELIMS 2019

DEBTORS RECONCILIATION 28 MARKS

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ACTIVITY 4

Debtors Age Analysis

2.1 Identify the problem with debtor G. Hugo. Quote figures.

His total debt is R5 750 (R4 200 + R1 550)

and his credit limit is R5 500,  thus G. Hugo is over his credit
limit. 

OR

G. Hugo is R250 over his credit limit.   2

2.2 What should the credit controller do about N. Tshabalala’s
account in March 2018? Give THREE actions.

 Contact N. Tshabalala about paying R1 175 and if he does

not, hand this amount over to the lawyers.  
 Charge interest on the R1 175 and R1 350.  
 Ensure that no further credit sales are made to N. Tshabalala
until the debt is settled.   6
2.3 Explain why debtor, A. Wijn, should be handed over to the
attorneys.

The debtor, A. Wijn, does not pay in time (>90 days)  2

VALUE ADDEDD TAX

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ACTIVITY 1 ASC 2019

VAT 15 MARKS

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ACTIVITY 2 NOV 2018 , QUESTION 2

VAT 14 MARKS

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ACTIVITY 3 FEB/MAR 2018 , QUESTION 1

VAT 15 MARKS

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ACTIVITY 4 FEB/MAR 2017

VAT 14 MARKS

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STOCK VALUATION

ACTIVITY ONE NOV 2019 , QUESTION 2

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ACTIVITY TWO NOV 2018 , QUESTION 5

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ACTIVITY THREE NOV 2015 , QUESTION 2

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ACTIVITY 4 NOV 2017

5.1 CONCEPTS
Accept understandable abbreviations

5.1.1 Weighted average / WA 

5.1.2 Perpetual 
5.1.3 First-in-first-out / FIFO 
5.1.4 Expense  4

5.2 HOT-WHEELS (PTY) LTD

Motorbikes:

5.2.1 Calculate the value of the closing stock on 30 September 2017 using
the specific identification method.

243 000  + 109 600  + 252 800  = 605 400  one part correct
18 – 8 15 – 11 18 – 10
(10 x 24 300) + (4 x 27 400) + (8 x 31 600)

OR
OS +P – COS = CS
one mark one mark four marks one method mark
291 600 + 1 125 600 – 811 800 = 605 400
316 000 + 301 400 + 194 400 7

5.2.2 Mike requires your advice on the three different models of motorbikes
in which he is trading. Explain TWO points of advice.

Any TWO valid points of advice  

Part-marks for unclear/incomplete explanation

Expected responses:
 Reduce the price of AO2 to increase sales / A lower mark-up% will help
in reducing stock levels.
 Discontinue / decrease the AO2 product and look at stocking alternative
later model products.
 Stock more AO3 products as they seem to be more popular and in an
affordable range.
 Stock more of the AO4 model because gross profit per unit is the biggest
on the item. 4

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Helmets:
5.2.3 Calculate the value of the closing stock on 30 September 2017 using
the weighted-average method.
Mark one line only – choose line to benefit candidate

51 675 four marks

54 300 two marks (5 x 525) two marks
15 000  + 39 300  – 2 625  x 12  = 6 201  one part correct; must x12
30  + 75  – 5 
105 two marks 100 three marks
(517 x 12)
OR 516,75 x 12 = 6 201 or 6 204 (weighted-average rounded off)
seven marks 9

5.2.4 Is the weighted-average method appropriate to value the helmets?

Explain ONE point.
Yes/No  Explanation  Part-marks for unclear/incomplete explanation

Explanation for yes:

 These are low cost compared to the other products Mike sells.
 The items are of similar value.
Explanation for no:
 Helmets are only demanded by a select few bike enthusiasts.
 The business does not buy very large quantities.
 The prices are always increasing so the later model will be more
expensive.
3

5.2.5 Mike suspects that helmets are being stolen from the shop despite
using security cameras. Provide a calculation to verify his suspicion.
(30 + 75 – 5)
100  – 12  – 85  = 3 helmets missing  One part correct
One part correct 5
What can Mike do to improve the internal control of stock?
State THREE points.
Three valid points   
Expected responses:
 Do regular physical stock counts
 Place tracking devices on the products / security price tags
 Provide secure display cabinets for the stock
 Improve security at the gates / inspect items and check to sales slip
 Division of duties (if staff is suspected)
 Buy in smaller quantities / more regularly
Do NOT accept security cameras / CCTV 3

TOTAL MARKS
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ACTIVITY 5 ASC 2018

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QUESTION 2

2.1 Accept abbreviations

2.1.1 Selling and distribution cost 

2.1.2 Direct labour cost 
2.1.3 Direct/raw materials cost 
2.1.4 Administration cost 
4

2.2 TIGHT-FIT MANUFACTURERS

2.2.1 Calculate: Value of the closing stock of raw materials

Workings Answer
2 607 000  x 3 900 
23 700  429 000 
Operation, one part correct
110 two marks must multiply by 3 900 4

Calculate: Value of direct/raw materials issued for production

Workings Answer

2 607 000  – 429 000  see above 2 178 000 

Operation, one part correct
OR (23 700 – 3 900) x 110 one method mark (see above)
19 800 one mark 3

Calculate: Correct factory overhead costs

Workings Answer
69 600 one mark – 13 050 two marks
746 670 + 56 550  + 59 280  862 500 
e.g. Operation, one part correct
746 670 + 56 550 – 59 280 would be three marks plus the method mark on answer
746 670 – 56 550 – 59 280 would be 0 marks and no method mark on answer 6

2.2.2 Production Cost Statement for the year ended 31 March 2018.
Incorrect placement of DMC and FOHC: do not award ticks for details; -1 presentation if WIPS details not given;
Will also lose method marks on Prime cost subtotal; the figures will get method mark even if incorrectly placed

 Direct materials cost see DMC in 2.2.1 2 178 000 

Direct labour cost 3 522 000 
Prime cost Must be DMC + DLC 5 700 000 
 Factory overhead cost see FOHC in
862 500 
2.2.1
Total manufacturing costs Operation one part correct, DMC+DLC+FOHC 6 562 500 
regardless of placement

Work-in-process at beginning of year 147 500

6 710 000
Work-in-process at end of year
Balancing figure; do not accept 231 000 or 118 000 (305 000) 
must be subtotal above – COPOFG

Cost of production of finished goods operation, one part correct 6 405 000  12
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(118 000 + 6 518 000  – 231 000)

2.2.3 Give TWO reasons why the business should support local suppliers.
Any TWO relevant reasons  
Reasons:
 No import charges will be paid
 Prices more stable / prices not influenced by fluctuations in exchange rates.
 Creates more employment opportunities to people from the country / enhances GDP of the
country / helps small or new businesses / improves standard of living
 No delays in the case of emergency orders or returns / more convenient to transport goods
 Money stays in the country / improves exchange rate
 Less crime if employment increases
 Goodwill of the community (Ubuntu) 2

2.3 BREAK-TIME MANUFACTURERS

2.3.1 Calculate the direct labour cost for the year ended 30 April 2018.
Workings Answer
331 500 x R7,56 Two marks or nothing on final answer R2 506 140  2

Calculate the break-even point for the year ended 30 April 2018.
Workings Answer
R3 102 500  365 000 units 
R28  – R19,50  Operation, one part correct
Must not be R, c, % etc
8,50 two marks
Units do not have to be stated 4

2.3.2 Explain why the owner should be concerned about the break-even point. Quote figures.
Compare BEP with level of production  Figures 
 The business produced and sold 331 500 units. This is below the break-even
point of 365 000 units (33 500 units less) see 2.3.1
 The BEP has increased by 131 000 units (56%) while the number of units
produced and sold increased by 37 500 units (13%). 3

2.3.3 Explain why the owner would NOT be satisfied with the direct labour cost per unit.
Quote figures.
Trend  Figures  Explanation  Do not accept comment on total DLC

 Trend: The increase in the labour cost is R1,96 per unit (R5,60 to R7,56) / 35% increase /
DLC per unit went up by 35% while units produced went by 13%
 Explanation: This exceeds the inflation rate / workers have been inefficient / production
volume did not increase as much as the DLC per unit 3
Give ONE solution to this problem.
Any ONE relevant control measure  Part marks for unclear / incomplete answer

 Set production targets of production (during normal hours) / time and motion studies.
 Better supervision to ensure workers are on duty during normal working hours/ Set limits
on overtime hours and ensure foreman controls this.
 Reconsider conditions of service e.g. minimum normal hours, overtime rate.
 Have plans for disruption due to power cuts, strikes etc.
 Engage in skills training to improve efficiency of workers.
 Use machines more extensively
 Negotiate affordable / reasonable increases (in line with inflation) in salaries/ wages. 2

TOTAL MARKS
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ACTIVITY 1 NSC 2019

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ACTIVITY 2 FEB/MARCH 2018

QUESTION 6

6.1.1 Calculate the mark-up percentage on spare parts used in the Projected
Income Statement for March 2018.

22 875/ 30 500x 100 = 75%one part correct

3

6.1.2 Calculate % decrease in service fee income expected in April 2018.

13 500 / 150 000x 100 = 9% one part correct

(150 000 – 136 500) one mark
3

6.1.3 Calculate the additional space (in square metres) the business will rent
from April 2018.

6 000 / 75 = R80 
9 200 / R80 = 115 sqm 
Additional space = 115 – 75 = 40 square metres one part correct
OR
3 200 one mark 4
(9 200 – 6000) = 40 sqm one method mark
80 two marks

6.1.4 Calculate the interest rate on the fixed deposit.

5 700 – 2 700
3 000 x 12 x 100 = 8% one part correct
450 000 
5

6.2 Comment on the control of stock and explain how Vusi intends to
correct this. Quote figures.

Each item   Figures  Comparison figures not essential

Trading stock deficit reduced to R2 000 (was high at R14 000)

Increase in security expenses by R4 200 / from R5 000 to R9 200 / by 84%.

4

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6.3.1 Vusi is thinking of purchasing the business premises rather than renting
it. State ONE advantage and ONE disadvantage of this option.

Advantage  part-mark for unclear / incomplete answer

 Will not have to pay rent in future.
 Business will acquire a fixed asset. This increases the value of the
business.
 Extra space can be rented out to receive additional income.

Disadvantage part-mark for unclear / incomplete answer

 Rates on property must be paid.
 Additional maintenance costs will be incurred.
 Large initial cash outlay or an additional monthly instalment, including
interest.
 Not easy to relocate quickly
 Costs and time involved in selling a building.
4

6.3.2 Vusi offers a free delivery service of spare parts to customers, but plans
to discontinue this service on 31 March 2018.

State TWO points to support this decision.

Any TWO relevant points:  part-marks for unclear / incomplete answer

 Customers will be forced to have the spare parts fitted as part of the
service offered by the business.
 The business will be saving on the running cost of the delivery vehicle
 The main line of business is the repairing of vehicles – the sale of spare
parts supports this
 The profit on sale of spare parts is considerably lower than the fee income
for the repair service.
4

6.3.3 Calculate the cost of the new vehicle that he plans to purchase on
1 April 2018.

9 000 x 12  = R720 000 one part correct

0,15 or 15%
4

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6.4.1 Explain whether Water and electricity has been well controlled, or not.
Comment on control  Figures 
Part-mark for unclear / incomplete answer Comparison figures not necessary but may enhance
explanation

This expense has been well-controlled. If the projected amount of R4

500 considered the increase, it would have been R5 175. Only R5 000
was spent (R175 less than the adjusted projected amount.
OR
The projected amount (R4 500) has not taken in account the tariff
increase of 15% affected on 1 February 2018, which would have led
to an adjusted projected amount of R5 175. 3
6.4.2 Explain whether you agree with Vusi's decision not to use the
full budget for Advertising.
Comment on decision  Figures 
Part-mark for unclear / incomplete answer Comparison figures not necessary but may enhance
explanation

The actual amount spent is R2 900 less than the budgeted/projected. /

The amount spent (R1 800) is lower than the projected amount (R4 700).
This was a poor decision and the full amount should have been used
(considering that that mark-up on cost was also adjusted from the
projected 65% to 80%).
This had a negative effect on fee income (R22 500 less than 3
6.4.3 Explain whether Consumable stores have been well controlled, or
not.
Comparison of fee income and consumable stores  Figures 
Part-mark for unclear / incomplete answer Comparison figures not necessary but may enhance
explanation

Fee income was less than budgeted by R22 500 (15%) whilst servicing
expenses was over the budget by R6 450 (21,5%). An actual decrease in
fee income should see a proportional decrease in consumable stores 4
6.4.4 used. This
Explain howindicates
Vusi'sadecision
lack of control.
about the mark-up percentage on
spare parts has affected the business.
Comparison of mark-up% and sales Figures 
Part-mark for unclear / incomplete answer Comparison figures not necessary but may enhance
explanation

 The increase in the mark-up percentage (65% to 80%)

negatively impacted in spare-part sales.
 Sales was less than projected by R31 500 (R128 700 to R97 200). 4
 Profit on sales was less than projected by R7 500 (R50 700 to R43
200).
TOTAL MARKS

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ACTIVITY 3 FEB/MARCH 2016, QUESTION 6

6.1 KOBUS HARDWARE

6.1.1 Calculate the missing amounts indicated by (a) to (e) in the Cash Budget
for March and April 2016.

Calculation Amount
28 000 ÷ 7% x 60  One part correct 240 000 
(a)
R28 250 x 90/10 One part correct R254 250
(b)
6000  One part correct 6 330 
(c) (3 000 x 2) x 105,5% 

180 000 ÷ 24 R7 500

(d)
180 000 x 10,5% x 1/12 One part correct R1 575
(e) 17

6.1.2 Complete the Debtors' Collection Schedule.

CREDIT SALES MARCH APRIL

FEBRUARY 152 000  76 000
MARCH 160 000  80 000
6.1 ÷ 60 x 40 68 400 50% of March credit
sales
APRIL 158 400 158 400 x 45% x 95% 67 716
144 400 147 716
operation

6.1.3 Calculate the percentage increase in sundry expenses.

2 190 
(89 790 – 87 600) = 2,5%  One part correct
87 600 
4

Paper Two Topics –Solutions

 51

6.1.4 The Cash Budget for March and April 2016 indicates that this business
will face serious financial difficulties. Identify TWO items to support this
statement. Quote relevant figures.

Item   Figures  
 The overdraft in March is R75 300 and April is R44 900. (This exceeds the
overdraft limit of R40 000 as approved by bank.)
 The business is going to acquire a loan of R180 000 in April 2016.

6.1.5 Explain why each of the items reflects a problem for the business and
advise Kobus regarding each case.

Item Explanation
Any two valid reasons   Alternative valid answers acceptable
Collection  Collections are much lower than expected.
from debtors  This will cause a cash flow problem.
 Internal control of debtors is poor.
Any two valid reasons   Alternative valid answers acceptable
 These are a lot lower than they should have been.
Payments to
 Suppliers will stop selling to the business.
creditors  Interest can be charged by the creditors.
 Poor credit rating for the business.
Any two valid reasons   Alternative valid answers acceptable
 The policy will lapse (risk of being uninsured).
Insurance  It will be difficult to replace assets.
 There could be an increase in premiums in future.
Any two valid reasons   Alternative valid answers acceptable
 This puts strain on meeting more important business
expenses.
Drawings  This creates a further cash flow problem.
 It is not ethical for the owner to draw more money while the
business is struggling. (Increased loans, overdraft)

(4 x 2) 8

Paper Two Topics –Solutions

 52

6.2 MANAGEMENT OF FIXED ASSETS

Identify ONE problem regarding each vehicle/driver. Quote figures to

support your answers. Give Kobus ONE point of advice for EACH
problem identified.

Problem with figures Advice

Problem      
Figures   
Leroy was absent for 8 days./ Investigate the reason
Vehicle 1 He is the highest paid driver, for his absence./Only
(Leroy) R8 000 where other drivers earn pay for the number of
R5 000. days at work.
Fred is travelling too many Possible disciplinary
kilometres (4 600 km for 80 trips action against Fred for
= 58 km per trip) which is higher unauthorised use of
Vehicle 2 than the maximum of 40 km per vehicle./Improve
(Fred) customer./He is travelling more internal control over the
km than Bheki (4 200 compared use of the vehicles.
to 2 800 km) but doing fewer
trips (70 compared to 110).
Bheki is doing the most number Consider replacing this
Vehicle 3 of trips (120) but his vehicle is vehicle as it is
(Bheki) the oldest and the most expensive to maintain.
expensive to run (R0,81 per km). 9

TOTAL MARKS

50

Paper Two Topics –Solutions

 53

ACTIVITY 4 FEB/MARCH 2015, QUESTION 6

6.1 Explain the importance of comparing budgeted figures with actual

figures achieved for the same period.

One valid explanation 

Deviations can be determined and remedial measures will be put in place

Establish whether the budgeting was realistic
To identify trends of mismanagement of cash 2

6.2 Calculate the missing amounts (indicated by a, b and c) in the Debtors'

Collection Schedule for the budgeted period March to May 2015.
a 6 048 
b 5 320 
c 15 750 
4

6.3 6.3.1 Calculate the budgeted total sales for March 2015.

10 500 x 100/20 = 52 500 

2

6.3.2 Calculate the amount budgeted for payments to creditors

during May 2015.
40 000
70 000  x 100/175  x 70%  = 28 000  any one part correct
or
12 000/30 x 70 = 28 000 4

6.3.3 Calculate the budgeted salaries of the shop assistants for April
2015.

102 000/12 = 8 500

8 500 x 3 = 25 500
15 300 x 9 = 137 700
25 500 + 137 700 = 163 200 any one part correct 3

Paper Two Topics –Solutions

 54

6.3.4 Calculate the % increase in the salary of the manager

expected in May 2015.
3 200 (1 mark)
(19 200 – 16 000) /16 000  = 20%  any one part correct
3

6.3.5 Calculate the amount of the additional loan expected to be

acquired on 1 April 2015.

875 x (100 x12) /14  = 75 000 any one part correct

6.4 An official of the local municipality has offered to recommend

Brakpan Stationers to supply stationery to the value of R500 000.
However, he will only do this if Vukile pays him R20 000 in cash.

Give Vukile advice in this regard. State TWO points.

Any two suggestions  

 This is actually a bribe which is unethical.

 If this information is made public, it will have a negative effect on
the business in the future.
 Vukile must tender formally to the municipality to secure the
contract through the normal processes.
4

Paper Two Topics –Solutions

6.5 Identify THREE over-payments in April. Provide figures to support
your answer. Provide a valid reason for each over-payment to
support Vukile's decisions.

Over-payment with figures Valid reason

Item and figure      

1 The bonus of the manager in He has retained the services

February 2015 (R24 000) was of a valuable employee
not taken into account.
2 Purchase of vehicle The difference between motor
(R180 000) vehicle expenses and delivery
expenses is R5 200 per month
3 Cash purchase of Possibly to take advantage of
merchandise (R28 000) was bulk discounts on purchases
significantly higher than the
budgeted figure (R12 000)
6
Explain how this difference of opinion with his wife can be avoided
in future.

As they are jointly running the business they should have a specific
meeting to determine the budget jointly and Vukile should consult his
wife before spending on unbudgeted items.  2
State TWO other strategies that Vukile and his wife could consider
in future to improve the results of the business.

Any two valid points:  

 Advertise monthly.
 Reduce number of shop assistants.
 Reinstate deliveries to customers.
 Negotiate longer credit terms with creditors. 2

TOTAL
MARKS

35