QUESTION $1$

$50$ MARKS

You have recently joined Slam $($Pty$)$ Ltd$,$ a company that manufactures and distributes brake pads to the automotive industry, as a financial accountant. The managing director and majority shareholder has asked you to assist him in interpreting the draft financial results for the year ended $30$ April $2024$ and to review the budget for the new financial year. The company uses first$-$in$-$fist out method of inventory valuation. As part of his preparations for the budget for the financial year ending $30$ April $2025,$ the accountant completed a breakeven analysis and concluded that the breakeven production and sales volume amounted to $20500$ units. The fact that the company only sold $20000$ units but is reporting a preliminary profit of R$112000$ for the year ended $30$ April $2024$ has raised a concern about the integrity of the information generated by finance. You established the following:

The draft income statement for the year ended $30$ April $2024$ is as follows:

$\backslash$table$[[,$Amount $($ZAR$)],[$Sales$,2000000],[$Cost of sales,$1628000],[$@$,$ Inventory at beginning of year,$-],[$@$,$ Raw materials,$500000],[$@$,$ Direct labour costs,$600000],[$@$,$ Manufacturing overheads,$935000],[$@$,$ Inventory at the end of the year: finished products,$(407000)$