QUESTION $1($continued$)$

THE FOLLOWING INFORMATION IS UNDER CONSIDERATION FOR THE $2024$

FINANCIAL YEAR BUDGET

$3\mathrm{.}1.$ Investigation to upgrade the existing factory and purchase of new machinery.

As part of its expansion plans to deal with emissions challenges and take advantage of the

demand trends, $SN$ is considering extending its existing plant to increase capacity and adding

new state$-$of$-$the$-$art machinery which are quicker and easier to use. Upgrades will also include

solar power to minimise energy use and contribute towards energy sustainability in South

Africa.

The following information was gathered as part of the investigation:

$3\mathrm{.}1\mathrm{.}1.$ Increased capacity for $2024$ will increase manufacturing and sales with the same

number of units. E$-$MTB units will increase to $31200$ and E$-$CB units to $20800.$

$3\mathrm{.}1\mathrm{.}2.$ New state$-$of$-$the$-$art machinery, with a $10-$year useful life, will be acquired for a cost of

R$15000000.$ SN$\text{'}$s accounting policy is to depreciate all machinery in full over its useful

life.

$3\mathrm{.}1\mathrm{.}3.$ The old machinery has a book value of $R2000000$ and a current resale value of $R2$

$500000.$ The old machinery will be sold and replaced with the new state$-$of$-$the$-$art

machinery.

$3\mathrm{.}1\mathrm{.}4.$ Direct labour time will be reduced to $60$ minutes per bike.

$3\mathrm{.}1\mathrm{.}5.$ Training on operating the new machinery will cost $R500000.$ This cost will be covered

by the supplier of the machinery.

$3\mathrm{.}1\mathrm{.}6.$ Expansion to the factory will cost R$25000000.$ This expansion will include solar power

to minimise energy use.

$3\mathrm{.}1\mathrm{.}7.$ Unless otherwise stated, all other applicable information will remain the same as in the

$2023$ financial year budget information above.