You are provided with information relating to Lamba Traders, a business owned by Larry Lamba - NSC Accounting - Question 6 - 2017 - Paper 1

The purpose of a Projected Income Statement is to estimate the profit that will be earned over a specified period. It provides insight into projected income and expenses, assisting management in decision-making.

To calculate the % of debtors expected to comply with the credit terms, use the formula:

$ext{Percentage} = \left( \frac{56 000 + 125 440}{224 000} \right) \times 100 = 81 \%$

This implies that 81% of debtors are likely to comply with the payment terms.

The % of bad debts expected can be calculated with the following formula:

$\text{Percentage of Bad Debts} = \left( \frac{224 000 - 56 000 - 125 440}{224 000} \right) \times 100 = 40\%$

This indicates that 40% of the debts are likely to be considered bad.

Larry believes that Shirley does not deserve a bonus as 58% of the amounts owed are still within the credit terms, while 42% are not compliant. This shows a significant portion of debtors are not paying on time, which may reflect poorly on her performance.

1. Contact debtors through various methods such as phone calls, emails, or SMS reminders to prompt payment.
2. Offer discounts for prompt payments to encourage timely settlement of accounts.

The fixed % of sales for delivery expenses is calculated as follows:

\text{Fixed %} = 4\%

To calculate the amount of the loan to be repaid:

$\text{Amount} = 2 975 \times 12 + 0.085 = R72 000$

Larry feels that these variances are problematic because:

1. Cash sales are over budget, indicating cash flow issues that could hinder operations.
2. The advertising budget was under-utilized, which might lead to decreased sales and customer awareness.
3. There were issues with packing materials which could affect delivery efficiency and customer satisfaction.
4. Delivery expenses were high, exceeding the budget, which further strains financial resources.