Donald May owns Breezy Traders that sell air-conditioner units - NSC Accounting - Question 6 - 2018 - Paper 1
Question 6
Donald May owns Breezy Traders that sell air-conditioner units. The budget period ends on 31 October 2018.
6.1 Complete the Debtors' Collection Schedule for October... show full transcript
Worked Solution & Example Answer:Donald May owns Breezy Traders that sell air-conditioner units - NSC Accounting - Question 6 - 2018 - Paper 1
Step 1
Complete the Debtors' Collection Schedule for October 2018
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Answer
The Debtors' Collection Schedule for October 2018 is:
MONTHS
CREDIT SALES
SEP. 2018
OCT. 2018
July
369,600
81,312
79,800
August
384,400
211,420
84,568
September
403,200
76,680
221,760
October
420,000
369,340
386,128
Step 2
Calculate the amounts indicated by (i) to (iii) in the extract from the Cash Budget
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Answer
i) Cash sales for September are calculated as follows:
The sales assistants should be satisfied with this increase as it exceeds the current inflation rate of 10 ext{%}.
Step 4
Explain the effect of the new competitor on any TWO items in the budget for September
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Answer
Total sales decreased from R1,008,000 to R840,000 (R168,000 decrease).
2. Cash sales are below budget (R604,800 to R336,000) indicating a decrease in credit sales (R504,000 to R403,200).
Step 5
Identify TWO changes Donald implemented in October in response to the new competitor. Quote figures. Give ONE reason for EACH change.
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Answer
Decrease in cash purchases from R630,000 to R252,000 due to less stock being required.
2. Increase in credit purchases from R504,000 to R882,000 to improve cash flow and meet demands.
Step 6
Explain why Donald feels that his decisions were successful. Provide TWO points (with figures).
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Answer
Sales of air-conditioners exceeded budget by 50 units (300 - 250).
2. Cash surplus exceeded budget (R420,000 to R485,000) indicating effective cost management.
