QUESTION ONE $[25]$

The following information was extracted from the December $2023$ budget of Ashandi Ltd:

Estimated sales for the financial year $2000$ units

Selling price per bookshelf R$600$

Variable production cost per bookshelf:

$$ Direct material R$180$

$$ Direct labour R$120$

$$ Overheads R$60$

Fixed production overheads R$170000$

Selling and administrative expenses:

$$ Salary of sales manager for the year R$100000$

$$ Sales commission $10\%$ of sales

You are required to calculate the:

$1\mathrm{.}1$ Breakeven quantity $(6)$

$1\mathrm{.}2$ Breakeven value using the marginal income ratio $(6)$

$1\mathrm{.}3$ Margin of safety in term of units $(6)$

$1\mathrm{.}4$ Number of sales units required to make a profit of R$180000.(7)$

QUESTION TWO $[25]$

Hyusi Ltd uses the standard costing system. The standards for Product Beta are as follows:

Material $4$ kilograms at R$2\mathrm{.}50$ per kilogram

Labour $4$ hours at R$100$ per hour

Variable overheads R$40$ per labour hour

Fixed overheads R$48000$

Normal production $24000$ units per month

Actual production for the month of January $2024$ on Product Beta is:

Material $81000$ kilograms used at R$2\mathrm{.}50$ per kg

Labour $78000$ hours worked at R$96$ per hour

Variable overheads R$44$ per labour hour

Fixed overheads R$53000$

Normal production $20000$ units

Required:

$2\mathrm{.}1$ Calculate and comment $($favourable $/$ unfavourable$)$ on the following variances:

$2\mathrm{.}1\mathrm{.}1$ Raw material usage variance. $(5)$

$2\mathrm{.}1\mathrm{.}2$ Fixed overhead spending variance. $(5)$

$2\mathrm{.}1\mathrm{.}3$ Variable overhead efficiency variance. $(5)$

$2\mathrm{.}2$ Describe the underlying causes for variances. $(5)$

$2\mathrm{.}3$ Discuss the merits of budgeting. $(5)$

QUESTION THREE $[20]$

The information provided below relates to Daniel Ltd$.$

$1.$ The bank balance on $31$ May was R$56000($favourable$)$

$2.$ Actual and budgeted sales are as follows:

May R$260000$

June R$280000$

July R$300000$

$$ Cash sales are expected to be $40\%$ of total sales.

$$ Debtors are expected to settle their accounts as follows:

$70\%$ during the month of sale, subject to a $5\%$ discount

$30\%$ in the month following the sale

$3.$ Actual and budgeted purchases for the month are as follows:

May R$140000$

June R$160000$

July R$180000$

$40\%$ of all purchasers are for cash

$$ Creditors are paid in full in the month following the purchase transaction.

$4.$ Rent expense amounts to R$15000$ per month, payable monthly.

$5.$ Variable selling and administrative expenses are estimated at $25\%$ of sales. They are

payable at the end of every month.

$6.$ Insurance premium amounts to R$72000$ per annum, payable monthly.

Required:

Prepare the Cash Budget for June and July.

END OF ASSIGNMENT QUESTION