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A budget is a plan of future income and expenses of a business as shown below - NSC Agricultural Management Practices - Question 4 - 2021 - Paper 1

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A budget is a plan of future income and expenses of a business as shown below. Expected income and expenditure information: - 2 kg seed @ R400,00 per kg - 850 kg f... show full transcript

Worked Solution & Example Answer:A budget is a plan of future income and expenses of a business as shown below - NSC Agricultural Management Practices - Question 4 - 2021 - Paper 1

Step 1

Draw up a budget

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Answer

To effectively draw up a budget for the crop enterprise, we will calculate both expected expenditures and expected income.

1. Expected Expenditure:

  • Seed: 2 kg @ R400.00/kg = R800.00
  • Fertiliser: 850 kg @ R80.00/50 kg = R1,360.00
  • Transport for fertiliser: 17 bags @ R5.00/bag = R85.00
  • Wages for workers: 2 workers @ R400.00/week = R800.00
  • Packaging material: 1,500 items @ R1.50 each = R2,250.00
  • Transport to market: 6 trips @ R300.00/trip = R1,800.00

Total expected expenditure = R800.00 + R1,360.00 + R85.00 + R800.00 + R2,250.00 + R1,800.00 = R7,095.00

2. Expected Income:

  • Sales of product: 1,500 boxes @ R15.00 each = R22,500.00

Total expected income = R22,500.00

3. Expected Profit: Profit = Total Income - Total Expenditure = R22,500.00 - R7,095.00 = R15,405.00

Step 2

4.2.1 Explain the following terms that are used in the Balance Sheet.

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Answer

(a) Fixed assets: These are long-term assets purchased for use in the business that are not intended to be sold or converted into cash.

(b) Depreciation: It is a systematic reduction in the recorded cost of a fixed asset, reflecting its usage and aging over time.

(c) Creditor: A creditor is an individual or organization to whom money is owed by the farm.

Step 3

4.2.2 Describe the importance of analysing the Income Statement as a financial record.

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Answer

Analyzing the Income Statement is vital for:

  1. Determining profitability or losses.
  2. Assessing financial performance to identify areas for improvement.
  3. Making adjustments to budgets based on performance.

Step 4

4.3 Give THREE reasons why consumers are interested in buying processed products.

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Answer

  1. Processed products tend to have a longer shelf life.
  2. They are easier to transport and handle.
  3. Convenience in preparation and availability during off-seasons.

Step 5

4.4 Name THREE important reasons for the grading of agricultural products.

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Answer

  1. To ensure standardization of quality for consumers.
  2. Helps in obtaining better prices in the market.
  3. To facilitate proper categorization and recognition in trade.

Step 6

4.5.1 Explain why the processing of fruit juice concentrate would be a good strategy.

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Answer

Processing of fruit juice concentrate extends the shelf life of the product, adds value, and reduces the chances of spoilage and losses during transport.

Step 7

4.5.2 Calculate the profit made per bottle.

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Answer

Profit = Selling Price - Break-even Point = R116.00 - R82.00 = R34.00.

Step 8

4.5.3 Determine the value in South African rand (ZAR).

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Using the exchange rate, the value in ZAR for €12 would be calculated based on the current rate (for example, if €1 = R16, then: Value in ZAR = €12 x R16 = R192.00).

Step 9

4.5.4 Predict the influence that the exchange rate will have on the profit.

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Answer

If the Rand weakens, the profit could decrease as costs become higher in local currency terms. Conversely, a stronger Rand may enhance profitability.

Step 10

4.6.1 Define harvesting of an agricultural crop.

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Answer

Harvesting is the process of gathering mature crop products from the field and animals.

Step 11

4.6.2 Name THREE advantages of harvesting farm produce by hand.

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Answer

  1. It is relatively inexpensive.
  2. Allows for careful selection of ripe produce.
  3. Less damage to crops compared to mechanical methods.

Step 12

4.6.3 State FOUR purposes for which crops are used.

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Answer

  1. Selling for profit.
  2. Food for animals or human consumption.
  3. Industrial uses (medicines, cosmetics).
  4. Raw materials for manufacturing.

Step 13

4.7 Describe THREE aspects to consider when designing packaging material for agricultural products.

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  1. Cost-effectiveness to ensure affordability.
  2. Type and protection of material to maintain product integrity.
  3. Consumer appeal and ease of use to encourage sales.

Step 14

4.8 Describe FOUR main causes of food spoilage.

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Answer

  1. Presence of microorganisms.
  2. Activity of enzymes that degrade food.
  3. Damage from pests or insects.
  4. Improper storage conditions leading to oxidation.

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