QUESTION $1(10$ marks$)$

You have been presented with a working paper calculating planning and performance materiality:

The directors provided you with the following extract from the financial statements:

Extracts from the financial statements

During the $2021$ financial year, C the World was awarded a R$100000$ once$-$off contract to perform travel

arrangements for a soccer team.

Your audit firm applies the following percentages in calculating planning materiality:

Turnover: $0\mathrm{.}5-1\%.$

Gross Profit: $1-2\%$

Profit before tax: $5-10\%$

Total assets: $1-2\%$

You are required to:

$1\mathrm{.}1$ Calculate and motivate the planning materiality to be used for the year ended $31$ March $2021.$