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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
Complete the Debtors' Collection Schedule for March to May 2021.
Answer
To complete the Debtors' Collection Schedule for March to May 2021, we must first organize data into the schedule, capturing the relevant cash and credit sales amounts. The completed schedule should reflect the total credit sales, collections, and outstanding amounts for the specified months. Ensure that the calculations for each month consider the credit collection percentages and total sales figures provided.
Step 2
Calculate the missing amounts indicated by (a) to (d) in the Cash Budget.
Answer
Each component indicated requires specific calculations based on given figures:
(a) For cash sales in April, use the formula:
(b) For the increase in loan from Janet Bloom, calculate the adjustment for interest at 9.2% using the formula:
(c) Salaries for April should be calculated based on the number of employees and their respective salaries, considering any increases due to inflation or company policy.
(d) For the rent expense in March 2021, refer to the agreement, noting if any adjustments apply.
Step 3
Explain the decisions that the directors took regarding the budgeted and actual expenditure for advertising in May 2021. Quote figures or calculations.
Answer
The directors increased the advertising budget due to a need to improve sales visibility. Initially budgeted at R 30,000, it was raised to R 42,000 to counteract sales declines. This decision was based on historical performance metrics indicating a 1.5x return on advertising spend.
Step 4
Provide TWO points that you would include in your report on the effect that the advertising decisions have actually had on customers and sales in May 2021. Quote figures or calculations.
Answer
Firstly, customer engagement increased by 22.7%, equating to approximately an additional 20 customers compared to May 2020 totals. Secondly, sales grew by R 8,000, rising from R 770,000 to R 778,000, indicating a solidified effect of increased advertising efforts.
Step 5
Explain how the decline in the national economy has affected the average amount that customers spent in May 2021. Quote figures.
Answer
Customers are now spending less due to tightened disposable income. The average sale per customer has dropped from R 5,111 in April 2020 to R 4,000 in May 2021, reflecting a decrease of about 22%. This downturn correlates directly with broader economic indicators.
Step 6
Comment on whether the consumable stores have been well controlled or not. Quote figures or calculations.
Answer
The consumable stores have been managed efficiently, showing a control average of 28% of income with the current budget being R 1,800,000. Only two stores exceeded their budget by 40% vs. a calculated budget figure.
Step 7
Calculate the reduction of the area rented in (square metres).
Answer
To find the reduction in area rented, apply the following formula:
ext{Area Reduction} = rac{ ext{Initial Rent Cost} - ext{New Rent Cost}}{ ext{Cost per Square Meter}}
Given the initial cost is R 39,960 and the new cost is R 31,968, assuming cost per square meter at R 333, the calculation yields a total area reduction.