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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. 6.1 On 30 April 2017 Piet identified the figures below. Comment on the control of... 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
Comment on the control of EACH item and give ONE point of advice in each case.
Answer
Telephone
The control over the telephone expenses shows that the actual amount spent is significantly higher than the budgeted amount, indicating overspending. This may suggest poor monitoring or usage of telephone services within the organization.
Advice: To manage this expense better, Piet should implement monitoring of private calls made by staff and possibly increase the budget allocation if these calls are essential for business operations.
Staff Training
The actual expenditure on staff training is notably lower than budgeted, which can imply under-utilization of allocated resources or a lack of training programs.
Advice: Piet should ensure that staff training is prioritized, as it is vital for employee development and efficiency. It may be beneficial to reassess training needs and utilize the entire budget for this essential expense.
Step 2
Step 3
Step 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: R36 000 v) Repayment of loan: R48 000 vi) Cash at end of month: R35 500 vii) Cash deficit for the month: (R42 800)
Step 5
Is not offering a free delivery service a good idea? Explain.
Answer
It depends on the potential impact on customer satisfaction and retention. Not offering the service may save costs, but it could lead to losing customers who expect delivery. It's essential to consider customer feedback and competitor services when making this decision.
Step 6
Explain ONE advantage and ONE disadvantage of EACH option.
Answer
Raise a new loan
Advantage: He will own the assets longer than five years if he takes good care of them.
Disadvantage: He has to pay interest monthly which may affect cash flow.
Hire (lease) the assets from Computer Solutions
Advantage: Does not have to raise a loan or pay interest, preserving cash flow.
Disadvantage: Lease charges can be expensive and may continue for five years even after using the equipment.
Ask a friend to become an equal partner by providing capital of R180 000
Advantage: Will share costs and risks associated with running the business.
Disadvantage: He will need to share profits with his friend, reducing overall earnings.