Accounting English Paper 2 2015 Questions and Answers Part 4

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Information

Additional Information in Respect of Fixed Assets

  • A vehicle was sold at its carrying value on the LAST day of the financial year. Depreciation is written off on vehicles at 20 % p. a. on the diminishing-balance method.
  • Land and buildings were sold at cost during the financial year.
Additional Information in Respect of Fixed Assets
Trade and other receivables include:31 October 201431 October 2013
SARS: Income taxR22 5000
Additional Information in Respect of Fixed Assets
Trade and other payables include:31 October 201431 October 2013
SARS: Income tax0R27 500
Shareholders for dividendsR450 000R385 000

Details of Ordinary Share Capital

  • Ordinary share capital at the beginning of the 2014 financial year consisted of 700 000 ordinary shares with a total value of R3 150 000.
  • On 1 November 2013,50 000 additional shares were issued at R6,00 each.
  • There were no further changes to share capital.
  • The dividends (interim and final) for the financial year ended 31 October 2014 amounted to R825 000.

Financial Indicators for the Past Two Financial Years

Financial Indicators for the Past Two Financial Years
31 October 201431 October 2013
Current ratio3,10: 12,23: 1
Acid-test ratio?0,92: 1
Earnings per share?94 cents
Dividends per share110 cents75 cents
Return on average shareholders՚ equity?15 %
Debt-equity ratio?0,34: 1
Return on average capital employed26 %18 %
Net asset value per share593 cents571 cents
Prices of Classic Ltd shares on the JSE950 cents725 cents
Interest on fixed deposit5,5 %5,5 %
Interest rate on loans12 %12 %

Question 5

Cost Accounting (45 marks; 25 minutes)

Princess Bin Factory

Princess Bin Factory manufactures one type of household bin. The financial year ended on 28 February 2015.

Required

  • Prepare the Production Cost Statement for the year ended 28 February 2015.
  • Prepare the Income Statement for the year ended on 28 February 2015.

Information

The Following Information Was Extracted from the Financial Records on 28 February 2015

The Following Information Was Extracted from the Financial Records on 28 February 2015
Administration costR 62 930
Raw/Direct material cost?
Factory overhead cost256 270
Selling and distribution cost127 100
Direct labour cost: Normal time452 000
Prime cost1 308 500
Work-in-process stock (1 March 2014)58 500
Work-in-process stock (28 February 2015)?
Sales2 180 000
Cost of sales?

The following information was not taken into account:

  • The factory employs six workers. Each worker earned R19 000 overtime per year.
  • Unused indirect material, R4 500.
  • Advertising (selling and distribution) includes R3 720 for a three-month contract which ends on 31 March 2015.
  • Rent expense was omitted from the figures above. Total rent paid amounted to R91 020. The rent for February 2015 has not been paid yet. Rent was increased by R820 per month on 1 January 2015.75 % of this expense must be allocated to the factory and the balance must be transferred to the Administration Cost Account.
  • 46 500 bins were manufactured during this financial year at a unit cost of R35.
  • The business uses a mark-up percentage of 60 % on cost. Trade discounts of R60 000 were offered to cash customers during this financial year.

Rob՚s Pencils

  • Rob Lambert is the owner of Rob՚s Pencils, a manufacturing business that produces one type of pencil. The financial year ended on 30 June 2014.
  • Production is based on orders received, therefore there are no work-in-process balances.

Required

  • Comment on the fixed cost per unit. Note that fixed costs increased from R236 800 in 2013 to R238 000 in 2014.
  • Rob wants to know if the level of production for this financial year was satisfactory.
  • Calculate the break-even point for the year ended 30 June 2014.
  • Do you consider the level of production to be satisfactory or not? Quote and explain figures to support your opinion.
  • Rob is concerned about the management of the variable costs.
  • Identify ONE problem regarding the variable costs. Quote appropriate figures to support your answer.
  • Provide TWO suggestions that he can use to address the problem identified.

Information

Financial Information Extracted from the Records of Rob՚s Pencils

Financial Information Extracted from the Records of Rob՚s Pencils
30 June 201430 June 2013
Total (R)Unit Cost (R)Total (R)Unit Cost (R)
Fixed costs238 0002,80236 8003,20
Variable costs:998 75011,75732 6009,90
Direct material cost467 5005,50296 0004,00
Direct labour cost391 0004,60318 2004,30
Selling and distribution cost140 2501,65118 4001,60
Selling price per unitR14,50R13,50
Number of units produced and sold85 00074 000
Break-even point (units)?65 778