QUESTION 1

Do some research (use sources other than your prescribed textbook) on the traditional costing system and the activity?based costing (ABC) system and answer the following questions. Remember to reference your answer and add your reference list to the bottom of this question.

a) Discuss any two differences between the traditional costing system and the activity?based costing (ABC) system for a business.

b) Identify one characteristic in organisation that make them more suited to using ABC method as opposed to the traditional costing method. Provide a reason for your answer.

c) Discuss three advantages of activity?based costing.

QUESTION 2

Hollow Oaks Dealers is run by Harry Hollow, a sole trader. Hollow Oaks Dealers is a general dealer who uses the perpetual inventory system. A constant mark?up of 20% on cost price is used.

The business is a registered VAT vendor and trades only with registered VAT Vendors. The business charges 15% VAT on all its sales. All amounts are inclusive of VAT unless VAT is not applicable. They deposit any monies received on the same day.

Hollow Oaks Dealers do not expect to award any settlement discounts, nor does it expect to qualify for any settlement discounts. All settlement discounts are therefore deemed to be incidental in nature.

Transactions, amongst other for March 2020:

Required:

Use the relevant transactions given above, to complete the following journals and general ledger accounts: Document numbers are NOT required. Round to the nearest rand.

a) The Debtors Journal for March 2020. Total only the sales and cost of sales columns.

b) The Debtors Allowances Journal for March 2020. Total only the sales and cost of sales columns.

c) The Debtors Allowances Journal for March 2020. Total only the sales and cost of sales columns.

d) The Sales Account, which has an opening balance of R 242 340. Balance the account. Settlement discounts amounting to R 2 870 (including VAT) has also been granted to debtors during March 2020.

e) The Cost of Sales Account which has an opening balance of R 152 000. No balancing of this account required.

Date Details of the transactions 1 Sold inventory on credit to Nandi Traders Ltd, credit invoice (C103) for R 45 000 (excluding VAT). 3 Received business rent from G. Howard, R6 540. 8 Weekly cash sales of inventory, R258 000. Nandi Traders Ltd returned unwanted goods, R3 200 (excluding VAT) see 1 March 2020. 15 Owner took inventory for own use, cost R 15 400. 23 Sold Inventory on credit to R. Lathebe, R76 430. 27 Nandi Traders paid R 27 800 towards her outstanding account. 30 R. Lathebe has been declared insolvent. A cheque of 40 cents in the rand for the amount purchased on 23 March was sent by his lawyer on 30 March 2020. The balance will need to be written off