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You are provided with information relating to XYZ Furnishers owned by Piet Morake - NSC Accounting - Question 6 - 2017 - Paper 1
Question 6
You are provided with information relating to XYZ Furnishers owned by Piet Morake. REQUIRED: 6.1 On 30 April 2017 Piet identified the figures below. Comment on the... show full transcript
Worked Solution & Example Answer:You are provided with information relating to XYZ Furnishers owned by Piet Morake - NSC Accounting - Question 6 - 2017 - Paper 1
Step 1
6.1 Comment on the control of EACH item and give ONE point of advice in each case.
Answer
Telephone
Comment: The telephone expenses were over-spent with an actual figure of R3,800, which is significantly higher than the budgeted amount of R1,000. This indicates a lack of control over the expenditure of private calls made by staff.
Advice: To enhance financial control, Piet should monitor call usage more carefully, possibly implementing a cap or charge for private calls to encourage responsible usage.
Staff training
Comment: The staff training expenses were under-spent with an actual figure of R800 compared to the budgeted amount of R2,500. This under-spending may negatively affect staff development.
Advice: Piet should consider revising the staff training budget upwards to ensure that staff development is prioritized, which could enhance overall efficiency and customer service.
Step 2
Step 3
Step 4
6.4 Identify/Calculate the missing figures (i) to (vii) in the Cash Budget.
Answer
i. Cash sales: R72,000
(ii) Cash purchases of stock: R20,000
(iii) Delivery expenses: R10,800
(iv) Salaries and wages: R38,700
(v) Loan repayment: R48,000
(vi) Cash at end of month: R35,500
(vii) Cash deficit for the month: (R42,800)
Step 5
6.5 Piet wants to save on costs by not offering a free delivery service. Is this a good idea? Explain.
Answer
Yes/No: It's a nuanced decision.
Explanation: Piet should consider several factors:
- The likelihood of losing customers who expect free delivery, which may lead them to competitors offering such services.
- The potential for increased sales if customers are satisfied with existing delivery services.
- The long-term implications for customer loyalty and business reputation.
Step 6
6.6 Explain ONE advantage and ONE disadvantage of EACH option.
Answer
Option 1: Raise a new loan
Advantage: Piet can own the equipment outright, which lasts longer than five years.
Disadvantage: He has to pay interest on the loan, which increases the overall cost of the equipment over time.
Option 2: Hire (lease) the assets from Computer Solutions
Advantage: He does not have to raise a loan and does not need to pay repair costs after the lease period.
Disadvantage: The lease charges are expensive, and he has to make monthly payments over five years even if he no longer requires the assets.
Option 3: Ask a friend to become an equal partner by providing capital of R180,000
Advantage: He will own the necessary funds without taking on debt, maintaining full control over the business operations.
Disadvantage: He will have to share his profits with his friend, which may affect his financial returns.