Accounting Grade 12 NSC November 2015 Memo (English)

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 12 ACCOUNTING NOVEMBER 2015 MEMORANDUM MARKS: 300 MARKING PRINCIPLES: 1. Penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item (no penalty for misplaced item). No double penalty applied. 2. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning marks on the figures for that item. 3. Full marks for correct answer. If answer incorrect, mark the workings provided. 4. If a pre-adjustment figure is shown as a final figure, allocate the part-mark for the working for that figure (not the method mark for the answer). 5. Unless otherwise indicated, the positive or negative effect of any figure must be considered to award the mark. If no + or – sign or bracket is provided, assume that the figure is positive. 6. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates. 7. This memorandum is not for public distribution, as certain items might imply incorrect treatment. The adjustments made are due to nuances in certain questions. 8. Where penalties are applied, the marks for that section of the question cannot be a final negative. 9. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer and at least one part must be correct before awarding the mark. 10. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. 11. Be aware of candidates who provide valid alternatives beyond the marking guideline. 12. Codes: f = foreign item; p = placement/presentation. This memorandum consists of 15 pages. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 2 November 2015 NSC – Memorandum QUESTION 1 1.1 BANK RECONCILIATION AND INTERNAL CONTROL 1.1.1 Calculate the correct bank balance on 30 June 2015. Cash Receipts Journal Cash Payments Journal (figures only) (figures only) 87 220 74 860 *OR: 7900 in CRJ  21 000 & 9700 in CPJ * 1 800  10 500 Both essential: 2 marks  6 500 8 960: 3 marks 8750 / 6710 / 2460: 2 marks  2 250  210 118 720 Foreign items -1 (max -2) 85 620 Bank balance on 30 June 2015: 33 100 2 method marks See CRJ total See CPJ total – 2 300  + 118 720  – 85 620 = 30 800  one part correct 13 OR: – 2 300 + 87 220 – 74 860 + 21 000 + 10 500 – 1 800 – 6 500 – 2 250 – 210 = 30 800 1.1.2 Bank Reconciliation Statement on 30 June 2015 Alternative Debit Credit Balance per Bank Statement R20 400 Balancing figure R 20 400  Could be Dr / Cr Credit outstanding deposit 18 500 18 500  Debit outstanding cheques: Could use – signs No. 962 (4 500) R 4 500  No. 982 (2 200) 2 200  No. 986 (1 400) 1 400  Balance as per Bank Account 30 800 30 800  See 1.1.1 38 900 38 900 -1 incorrect / no details (max -2) Foreign entries -1 (max -2) For 2-column method with no Debit/Credit indicated, assume left=Debit and right=Credit. For 2-column method with brackets used, do not accept brackets/negatives in any column. 8 1.1.3 Refer to Information E. Identify TWO separate problems with evidence from the information. Give advice for EACH problem. PROBLEM WITH EVIDENCE ADVICE Theft / Fraud / Error/ Internal control Check that the total of cash slips agree measures are lacking. Some of the cash to the total of the deposit slip.  slips (R7 000) have not been deposited / Specific advice required based on evidence. recorded. Problem  Evidence  Figures not required Rolling of cash / The deposit occurs Cash collected must be deposited much later after receipt of cash (15 days). immediately / Sales person must not deposit cash / Divide duties  Problem  Evidence  Figures not required 6 Specific advice required based on evidence. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 3 November 2015 NSC – Memorandum 1.2 DEBTORS' AGE ANALYSIS 1.2.1 As the internal auditor, what concerns would you have over Susan's job description? Explain. Any ONE valid point  Incomplete / unclear answer: 1 mark For 2 marks: • Lack of division of duties negatively affects internal control. • Susan is the only person dealing with invoicing and receipt of cash. • Nobody is checking Susan's work. For 1 mark: • Division of duties / Internal control 2 1.2.2 Identify TWO debtors who could have their credit limits increased. Pillay  Crooks  -1 for superfluous name (max -2) 2 1.2.3 Explain THREE different problems reflected by the Debtors' Age Analysis. Give evidence to support your answer. There must be 3 separate problems i.e. Payment periods + Credit limits + Selling to those who are not settling previous debts Part-marks for partial answers / partially correct answers Explanation of problem with evidence Problem  Slow payers / Non-payers / Lack of adherence to time terms / Problem Possibility of bad debts / Bad 1 Evidence  Specific evidence required i.e. names or figures Some debtors (37% / 18% / 19%) are taking longer than 30/60/90 days to settle debts / (e.g. Muller / Vasco / Aucamp) Problem  Credit limit / Not adhering to credit limit / Bad internal Problem control of credit limits 2 Evidence  Specific evidence required i.e. names or figures Muller is R2 000 over the limit Problem  Sales continue to be made to debtors whose accounts Problem are overdue / Bad control of sales to debtors 3 Evidence  Specific evidence required i.e. names or figures Aucamp / Ndlovu / Muller were allowed to buy even though they have debts which are 60 / 90 days old 9 TOTAL MARKS 40 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 4 November 2015 NSC – Memorandum QUESTION 2 2.1 INVENTORY VALUATION 2.1.1 Explain the difference between the perpetual stock system and the periodic stock system. Any valid difference with comparison  Incomplete / one-system only explanation: 1 mark Expected responses: Perpetual stock system Periodic stock system Cost of sales calculated at point of sale Cost of sales calculated at end of financial period Stock value can be determined/ identified Stock value determined/identified by stock at any time (from records) count Cost of sales account used Purchases account used Stock bought regarded as an asset Stock bought regarded as an expense 2 2.1.2 Calculate the value of the stock on hand on 28 February 2015 using the weighted-average method. 1 mark only 346 800 + 3686 400 [150 1 mark X 1 200 1 mark] 1 mark R4 033 200  – R180 000 x 650  = 3 853 200 4 marks x 650 300 + 3 230 – 150  if subtracted 3 380 3 marks 7 marks 1 mark = 1 140 x 650 = R741 000  one part correct 9 2.1.3 Calculate how long (in days) it will take to sell the closing stock of 650 jackets. Use the closing stock in your calculation. see 2.1.2 one part correct 741 000  x 365  = 86,9 or 87 days  3 853 200  – 741 000 3 112 200 4 033 200 – 180 000 see 2.1.2 2 marks OR : IF UNITS ARE USED 1 mark 2 marks 1 mark 1 method mark 650 / 2 730 x 365 = 86,9 or 87 days 5 2.1.4 Calculate the value of the closing stock using the FIFO method.    one part correct R632 400 + (140 x R1 200) = R800 400 168 000 3 marks 6 Give ONE reason in favour of changing to the FIFO method.  Incomplete / unclear reason: 1 mark • Gross profit will be higher because closing stock would be higher • Jackets are discrete products / Easy to count or identify jackets individually • Value of jackets is continuously changing and valued at more recent/realistic prices Give ONE reason against changing to the FIFO method.  Incomplete / unclear reason: 1 mark • No need to change as profit will be the same in the long-term • Unethical to manipulate the profit by changing the method of stock valuation • Tax would increase in first year as a result of increased profit • The change would affect comparisons across financial years 4 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 5 November 2015 NSC – Memorandum 2.2 INTERNAL CONTROL 2.2.1 Calculate the number of shirts stolen. 400  + 7 380  – 270  – 7 200  = 310  one part correct Give TWO points of advice. Any two valid points   Award part-marks for incomplete answers Expected responses for 2 marks: • Count stock regularly / randomly and check against stock records • Order smaller quantities, but more frequently • Improve physical security e.g. controls at entrance / security cameras • Claim on insurance policy Expected responses for 1 mark: Stock counts / Security cameras / Insurance 9 2.2.2 Product Comment on stock holding Explanation on how it will period and give figures affect the business Comment       Figures    Alternative valid explanation acceptable Must explain, not list See 2.1.3 Will be able to meet demand 87 days on hand which is for the winter season. Jackets appropriate / 87 days is too high as they are halfway through winter. Too few shirts are being kept They are likely to run out of Shirts on hand 14 days. stock and not meet the demand / lose customers. Too many jeans are on hand to Could end up not selling these Jeans support the sales, 319 days. items as fashion changes / Cash tied up in stock. 9 2.2.3 Josy is unsure whether she is charging the right prices for her products. Give her advice on EACH product. Quote figures. Advice with figures Product Any valid advice    Figures    Advice: Maintain / increase the price see 2.1.3 Jackets Figures: Sold 2 730 units / 80% of stock sold / 87 days holding period Advice: Maintain / increase the price [Price of R310 not relevant to rate of turnover] Shirts Figures: Sold 7 200 units / 93% of stock sold / only 14 days’ holding period Advice: Reduce the price Jeans Figures: Sold only 320 units / 53% of stock sold / 319 days holding period / 70% mark-up / R350 gross profit on R500 cost 6 TOTAL MARKS 50 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 6 November 2015 NSC – Memorandum QUESTION 3 3.1 PRIDONA LIMITED 3.1.1 Calculation of the correct net profit after tax Accept brackets instead of – If no sign, assume + Positive/negative effect & figure must be correct Foreign entries -1 (max -2) Incorrect net profit 2 493 600 Trading stock deficit –11 300  Provision for bad debts adjustment +2 400  Rent income –2 800  Insurance +4 500  Correction of error: Asset disposal 6 800 1 mark +13 600  Correct net profit before tax Operation, one part correct, 2 500 000  reasonable, must be approx. R2m Income tax Accept if no sign –750 000  Net profit after tax Check operation, NP – tax 1 750 000  13 3.1.2 RETAINED-INCOME NOTE ON 30 JUNE 2015 Balance at beginning of year 2 700 000 Net profit after tax see 3.1.1 1 750 000  Repurchase of shares 1 mark 2 marks (20 000  x R1,10 ) OR (50 000 – 28 000) (22 000)  One part correct, must be negative / brackets If 22 000 without brackets or –ve sign, give 3 marks Dividends One part correct, must be negative / brackets (1 475 600)  Interim 600 000  Final (3 980 000  x 0,22 ) One part correct 875 600  Balance at end of year Operation, one part correct 2 952 400  11 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 7 November 2015 NSC – Memorandum 3.1.3 PRIDONA LIMITED BALANCE SHEET AS AT 30 JUNE 2015 ASSETS NON-CURRENT ASSETS 8 950 000 Fixed assets at carrying value 8 950 000 CURRENT ASSETS TA-NCA 1 000 000 Inventories Must be in final column as 191 900 to get 2 marks 191 900 Trade and other receivables 315 700 316 000 – 1 000+ 5 200 – 9 000 + 4 500 See 3.1.1 Operation, 315 000 / 321 200 2 marks [-11 400 +2 400] 1 mark only one part correct 320 200 3 marks Cash and cash equivalents Balancing figure 492 400 TOTAL ASSETS Transfer OE + L 9 950 000 11 EQUITY AND LIABILITIES ORDINARY SHAREHOLDERS' EQUITY Operation 8 524 400 Ordinary share capital 5 572 000 Retained income see 3.1.2 2 952 400 2 NON-CURRENT LIABILITIES 207 000 Mortgage loan: Custom Bank 207 000 262 200 – 55 200 Any figure if subtracted one part correct 4 600 x 12 2 marks 5 CURRENT LIABILITIES Operation 1 218 600 Trade and other payable see 3.1.1 Operation, one part correct (261 000 – 1 000 + 2 800 ) 262 800 260 000 2 marks Current portion of loan See NCL *55 200 SARS: Income tax (750 000 – 725 000) *25 000 Operation, one part correct Shareholders for dividends see 3.1.2 *875 600 TOTAL EQUITY AND LIABILITIES Operation 9 950 000 30 *Items under CL may be combined 12 Foreign entries -1 (max -2) Presentation / Incorrect or incomplete details -1 (max -2) SARS R725 000 may not be shown as a current asset; final balance must be under CL Other misplaced BS items are not foreign – simply mark as wrong Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 8 November 2015 NSC – Memorandum 3.2 AUDIT REPORT 3.2.1 Choose the correct word from those given in brackets. Disclaimer  Give a reason.  Must explain that no opinion was expressed / must explain a reason why no opinion was expressed. Mark the reason independent of word chosen above. The external auditors did not express an opinion on the financial statements of Trimex Ltd Auditors were unable to express an opinion because they were not able to verify a significant part of the company's transaction Auditors were unable to express an opinion because there was insufficient evidence 2 3.2.2 Explain TWO consequences of this audit report for the company and/or the CEO. Any two consequences   Award part-marks for incomplete answers Responses for 2 marks: • The directors will be held accountable. • This is a bad publicity / negative point against the image of the company and CEO • It could affect the share price and demand for shares • The CEO / Directors might not be re-elected at the next AGM • Shareholders / investors will lose faith in the directors / company • Inquiry / investigation into the company or its directors • The company could be de-listed on the JSE • The auditors will be more vigilant in future / could increase audit fees if they spend more time on the audits in future. Responses for 1 mark: The CEO will be fired / Written warning / Investigation / Suspension. 4 TOTAL MARKS 60 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 9 November 2015 NSC – Memorandum QUESTION 4 4.1 4.1.1 Internal Auditor  Mark wrong if more than one response for each 4.1.2 Independent Auditor  4.1.3 Director  4.1.4 Balance Sheet  4 4.2 SENZO LTD 4.2.1 Calculate income tax paid. 1 175 000 – 846 000 Must be both 9 800  + 329 000  + 6 400  = 345 200  one part correct –9 800 – 329 000 – 6 400 = –345 200 Mark one line only. Signs may be reversed but must be consistent. Ledger T-account may be drafted. Figures could be in brackets. 5 Calculate proceeds from disposal of fixed assets (carrying value). 4 698 300 4 352 800      one part correct (2 598 300 + 2 100 000) – (4 137 700 + 215 100) = 345 500 2 598 300 + 2 100 000 – 4 137 700 – 215 100 = 345 500 –2 598 300 – 2 100 000 + 4 137 700 + 215 100 = –345 500 Mark one line only. Signs may be reversed but must be consistent. Ledger T-account may be drafted. Figures could be in brackets. 5 Calculate net change in cash and cash equivalents. (153 000  – 2 500 ) + 88 900  = 239 400  150 500 OR 1 mark 1 mark 1 mark 1 mark (88 900 – 2 500) + 153 000 = 239 400 86 400 Indicate whether this is a net inflow or net outflow of cash. Net inflow  Depends on calculation above 5 4.2.2 1 093 000  CASH EFFECTS OF FINANCING ACTIVITIES Operation, one part correct Proceeds from shares issued 705 000 * 2 967 000  + 258 000  – 2 520 000  One part correct, must be inflow 4 marks if amount correct but in brackets Re-purchase of shares 2 marks (312 000) * 60 000  x R5,20  4,30 + 0,90 both figures together One part correct must be outflow Increase in non-current liabilities (Loans) 700 000 Must be inflow for 2 marks 12 Ledger account formats may be used to show calculations. *If answer is combined as a net inflow, award only 1 method mark on final answer, not 2. *If net effect has been shown with workings, mark as follows: 2 967 000 – 2 520 000 – 54 000 = 393 000 1 mark 1 mark 2 marks 1 method mark Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 10 November 2015 NSC – Memorandum 4.2.3 Calculate the acid-test ratio for 2015. 340 300 (662 300  – 322 000 ) : 510 500  OR 245 000 + 6 400 + 88 900 2 marks = 0,7 : 1  one part correct in the form x : 1 OR 0,67:1 OR 0,66:1 NOT 0,6:1 4 Calculate the return on shareholders' equity (ROSHE) for 2015. (Use average equity in your calculation.) 846 000  x 100 ½ (2 718 000  + 3 439 500 ) 1 3 078 750 (3 marks) = 27,5%  one part correct – must be % OR 27,47% OR 27,48% 5 Calculate the net asset value per share (NAV). Must be Rands or cents 3 439 500  ÷ 690 000  x 100 = 498,5 cents  OR R4,99 one part correct OR 499 cents OR 498,47 cents OR 498,48 cents 3 4.3 DON LTD AND KEY LTD 4.3.1 Comment on the value of the shares of the two companies on the Johannesburg Securities Exchange (JSE). Explain how this will influence your choice of company. Financial indicators or Explanation, must involve a choice Do not accept comparison of JSE prices only explanations thereof;  2 marks or nothing with figures I would invest in Don Ltd as the shares seem to be in good demand Don   OR Ltd JSE price 400c > NAV 310c I would not invest in Don Ltd as the shares might be overpriced OR I would invest in Key Ltd as the shares seem to be under-valued Key   OR Ltd JSE price 645c < NAV 750c I would not invest in Key Ltd as the shares might be in low demand 6 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 11 November 2015 NSC – Memorandum 4.3.2 Compare and comment on the dividend pay-out policies of the two companies. Award part-marks for incomplete answers Financial indicators or Comparison and comment explanations thereof; Do not accept comparison of the DPS only Must mention both companies with figures  Can get 1 mark DPS 360 cents  Don Ltd is distributing a higher Don EPS 420 cents  percentage of income earned; Key Ltd Ltd OR 2 marks has decided to retain half of EPS. Distributes 86% of earnings OR Don Ltd appears to keep shareholders DPS 490 cents  satisfied by giving them good dividends; Key EPS 980 cents  Key Ltd appears to have plans for Ltd OR 2 marks growth (better long term benefits) / Distributes 50% of earnings equalisation of dividends over time. 6 4.3.3 Comment on the degree of risk and gearing. Explain how this will influence your choice of company. Award part-marks for incomplete answers Financial indicators or Comparison, must involve a choice explanations thereof Accept valid alternative terminology with figures  Can get 1 mark Must use D/E and ROTCE I choose Don Ltd as financial risk is low and gearing is positive (ROTCE exceeds interest) D/E ratio 0,3 : 1  OR I choose Don Ltd for its positive gearing Don (ROTCE exceeds interest) but they are not Ltd ROTCE 15,6%  making effective use of loans OR ROTCE >11,5% OR I do not choose Key Ltd as there is high financial risk and negative gearing / too much money borrowed and not able to use D/E ratio 1,6 : 1  the funds effectively Key OR I choose Key Ltd as there is high use of Ltd ROTCE 10,2%  loans and, and if they can improve efficiency OR ROTCE < 11,5% (ROTCE), profit would improve significantly. 6 4.3.4 Apart from the points mentioned above, what other factors would you consider before deciding in which company you are going to invest? Explain TWO points. Could present factors that they omitted from 4.3.1-4.3.3 Award part-marks for incomplete explanations Any two valid factors with explanation / figures as explanation   Figures not essential • ROSHE: Don Ltd’s return (17,2%) is much higher than that of Key Ltd (9,1%) • Liquidity: Key Ltd has a better current ratio (1,5:1) / acid-test ratio (0,8:1). • Stock turnover: Key Ltd is managing stock more efficiently (62 days) • Debtors’ collection: Key Ltd’s collection period is good (26 days) • Corporate social responsibility: indicates good reputation of company (King Code) • Directors: good professionalism will benefit the company and shareholders • Audit report: indicates if the auditors have detected any problems or not. 4 TOTAL MARKS 65 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 12 November 2015 NSC – Memorandum QUESTION 5 5.1 BRUCE TRADERS CASH BUDGET FOR NOVEMBER AND DECEMBER 2015 CASH BUDGET NOVEMBER 2015 DECEMBER 2015 R R CASH RECEIPTS: Cash sales  420 000 399 000 Cash from debtors 536 025 597 975 Commission income  6 000  7 000 Total receipts 5  962 025 1 003 975 Operation both columns, one part correct CASH PAYMENTS: Cash purchases of stock  120 000 114 000  480 000 Payments to creditors 520 000 If R600 000 –cash Purchases Nov Sundry expenses 22 500  20 700 Wages and salaries  200 000  256 000 Advertisements  33 000 0 2 marks if correct figure Repayment of loan Any figure  36 000 in wrong column Interest on loan  3 780  3 510 Total payments 17 935 280 874 210 Surplus (deficit) Operation 26 745  129 765 Opening bank balance (56 000)  (29 255) Closing bank balance Operation (29 255)  100 510 25 Superfluous/foreign entries -1 per item (max – 3) for Advertising for Dec, bad debts, discount, depreciation 5.2 SLEEPEZI BEDS (PTY) LTD 5.2.1 Calculate the percentage increase in the amount budgeted for salaries and wages for October 2015. 1 800 x 100 = 6%  % sign not essential here 30 000 1 Should the employees be satisfied with this? Explain. Yes / No – compare to inflation rate / compare to directors fees  3 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 13 November 2015 NSC – Memorandum 5.2.2 The financial director is pleased with the work being done by the bookkeeper and internal auditor. Identify an expense that indicates that he is correct.  Audit fees Explain your answer. Any valid explanation  Part-marks for partial answers Expected response for 2 marks: The audit fees are much lower than expected, which means that they spent less time on the audit / records were in order Expected response for 1 mark: Audit fees lower than expected 3 5.2.3 Comment on how the new competitor has affected the sales of Sleepezi Beds. Provide figures. Comment  Figures  Cash sales are ¼ of the amount budgeted Cash sales projected R1,2m while actual was R300 000 Actual cash sales for Sept were R1,28m and dropped to R300 000 in Oct Budgeted cash sales was 80% but actually achieved 20% Sales decreased by 60 beds Gross profit decreased by R120 000 (R2 000 gross profit per bed) Sales decreased by R400 000 Explain how Sleepezi Beds has responded to this problem. Provide THREE points. Provide figures. Part-marks for incomplete explanations Consider other valid alternatives They deliberately increased credit sales (R300 000 was budgeted Point 1 but R900 000 was sold on credit). Explanation  Figures  They increased delivery expenses to expand their target market / Point 2 improve after-sales service. (Budgeted R150 000 but spent R168 000; 12% increase). Explanation  Figures  They spent R40 000 on advertising (Budgeted R10 000; 300% Point 3 overspent). / Decreased directors fees by R44 000 to fund more advertising R30 000. Explanation  Figures  13 5.2.4 Comment on the cash balances. Provide figures. Any valid comment  Figure/s  Expected responses: Disappointing / they expected a closing balance of R335 000 The actual balance is an overdraft of R210 000 (difference R545 000) Actual balance for Sept is R230 000 while Oct reflects an overdraft of R210 000. (Difference R440 000). Explain how the directors can improve the cash balances in future. Explain TWO points. Any valid comment   Award part-marks for incomplete explanations Expected responses for 2 marks: Encourage debtors to pay faster Charge clients for deliveries Negotiate with creditors for longer Take out a loan (to reduce the overdraft and payment terms interest) Raise more capital / issue more shares Decrease mark-up to increase sales Move to cheaper premises Look for alternative income e.g. commission Expected responses for 1 mark: Decrease expenses / increase income / decrease rent / increase sales 6 TOTAL MARKS 50 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 14 November 2015 NSC – Memorandum QUESTION 6 6.1 SNAZZY HANDBAGS PRODUCTION COST STATEMENT ON 30 SEPTEMBER 2015 *Must be in correct section / Accept abbreviations Foreign items -1 (max -2) e.g. S&DC R219 200 & AC R380 000 If categories are incorrectly placed, penalise on mark for details, but mark R workings; will also lose method mark on prime cost subtotal * Direct material cost (976 000 – 17 000 ) 959 000  One part correct * Direct labour cost 1 mark for final correct answer 755 000  Prime Cost Operation DMC + DLC 1 714 000  * Factory overhead cost 14 720 (4 marks) (442 080  – 20 800  + 2 560+ 8 320 + 1 920+ 1 920) 436 000  12 800 (3 marks) One part correct Manufacturing cost Operation, one part correct 2 150 000  Work-in-process (1 October 2014) 74 000  Operation 2 224 000  Work-in-process (30 September 2015) (36 500)  Operation TCOP – subtotal above; Ignore brackets Total cost of production 2 187 500  21 6.2 HEALTHY LIFESTYLE COOKWARE 6.2.1 Calculate the variable cost per unit for 2015. 2 160 000 / 27 000  =R 80  one part correct 3 Calculate the break-even point for 2015. See above 2 850 000  / R175  – R80  = 30 000 units  one part correct R95 2 marks 5 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 15 November 2015 NSC – Memorandum 6.2.2 Explain why the owner should be concerned about the break-even point and level of production. Provide TWO points. Provide figures. There must be an explanation in each case Current production of 27 000 is less than the break-even Point 1 point of 30 000 units See 6.2.1 Figures  Explanation  Low level of production / Decrease in the level of production Point 2 from 32 000 units in 2014 to 27 000 in 2015. Figures  Explanation  BEP increased from 28 000 to 30 000 units See 6.2.1 – need to OR produce more units to break even. 4 6.2.3 Identify ONE other problem relating to this business. Provide figure(s). Figures  Problem  Accept valid alternatives • Increase in VC/u from R65 to R80 / increase in FC of R190 000 / decrease in turnover by R235 000. • A small percentage increase in selling price (9,4%) is not adequate to cover costs. • Selling price of R175 is higher than the R170 of the competitor. Difficult to compete in the market for pots. • Loss made in 2015: 4 725 000 – (2 850 000 + 2 160 000) = (285 000); compared to profit in previous year of R220 000. 2 TOTAL MARKS 35 TOTAL: 300 Copyright reserved