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BLOSSOM (Pty) Ltd sells expensive ladies' dresses of high quality - NSC Accounting - Question 3 - 2020 - Paper 2
Question 3
BLOSSOM (Pty) Ltd sells expensive ladies' dresses of high quality. They also repair dresses for customers, but they aim to break even on this service. Customers are... show full transcript
Worked Solution & Example Answer:BLOSSOM (Pty) Ltd sells expensive ladies' dresses of high quality - NSC Accounting - Question 3 - 2020 - Paper 2
Step 1
3.1 Complete the Debtors' Collection Schedule for March to May 2021.
Answer
To complete the Debtors' Collection Schedule, first identify the credit sales for each month:
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March: R364,000; expected receipts (30% in March, 70% in April):
- March Collections: R364,000 * 0.30 = R109,200
- April Collections: R364,000 * 0.70 = R254,800
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April: R409,500; expected receipts:
- April Collections: R409,500 * 0.30 = R122,850
- May Collections: R409,500 * 0.70 = R286,650
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May: R500,500; expected receipts:
- May Collections: R500,500 * 0.35 = R175,175
- June Collections: R500,500 * 0.65 = R325,325
Thus, the schedule reflects:
- March: R109,200 + R254,800 = R364,000
- April: R122,850 + R286,650 = R409,500
- May: R175,175 + R325,325 = R500,500.
Step 2
3.2 Calculate the missing amounts indicated by (a) to (d) in the Cash Budget.
Answer
For part (a), Cash Sales for April is calculated as:
- Cash Sales for April: Given total sales of R630,000 and cash sales being 35%, the calculation is:
For part (b), the increase in loan from Janet Bloom is calculated using:
- Increase in loan: R1,260 * 0.09 = R113.40, totaling R168,000. (c) For Salaries for March, calculate:
- Salaries: R35,280, considering an increase by 5%.
For part (d), Rent Expense for March is R36,000 after adjusting for the changes in the budget.
Step 3
3.3 Explain the decisions that the directors took regarding the budgeted and actual expenditure for advertising in May 2021.
Answer
The directors initially planned to budget R30,000 for advertising in May 2021. However, due to competitive pressures and the need to drive sales, they increased this budget to R42,000. This increase reflects a strategic decision to invest more in advertising amidst market competition to sustain customer engagement and sales growth.
Quote Figures: The increase of R12,000 represents a 150% increase from the original budget.
Step 4
3.3 The directors ask you for a report on the effect that the advertising decisions have actually had on customers and sales in May 2021.
Answer
The actual figures showed that the advertising investment led to a significant increase in customer engagement:
- Customers: Increased by 22.7% with actual figures totaling to approximately 80 customers from a previous 60.
- Sales: Notably, the sales revenue had also increased by R80,000 from R700,000 to R780,000, reflecting the positive impact of the advertising strategies.
Step 5
3.3 Explain how the decline in the national economy has affected the average amount that customers spent in May 2021.
Answer
The economic downturn led to a decline in customer spending habits, with the average amount spent dropping from R5,111 to R5,100 per customer. The directors noted that:
- Customers were more cautious and adopted lowered spending strategies, evidenced by reduced purchases.
- The effects of increased financial strain caused by the economy necessitated budgeting adjustments on the consumer side.
Step 6
Consumable stores: Comment on whether the consumable stores have been well controlled or not. Quote figures or calculations.
Answer
The report indicates that consumable stores were managed effectively, with actual expenditures remaining controlled. For example, consumption was at 28% of total income, indicating that operational expenses were closely monitored leading to savings in comparison to predicted overspendings.
Step 7
3.4 Rental and customers: Calculate the reduction in the area rented (in square metres).
Answer
To calculate the area reduction based on a rent reduction from R39,960 to R7,992, the calculations are as follows:
- Original rent (R39,960) divided by the new rate per square metre: This represents a decrease, reflecting the directors' successful negotiations for cost-saving measures.