Answer ALL the questions in this section.

QUESTION 1 (20 Marks)

Use the first-in-first-out (FIFO) method of inventory valuation to complete the following table for the purchases and issues of components stated below: (6 marks)

  Purchases Issues Balance
Date Quantity Price Amount Quantity Price Amount Quantity Price Amount

The following information regarding the purchases and issues of component X in Project J is available:

Date Units Total invoice amount
01 April 2023 32 400 R324 000
10 April 2023 34 800 R382 800
18 April 2023 42 000 R504 000
26 April 2023 15 600 R218 400
Issues to production
Date Units
02 April 2023 30 000
14 April 2023 28 800
20 April 2023 37 200
28 April 2023 12 000

Calculate the labour cost to Ascot Manufacturers in respect of S. Mbeki for the week ended
29 October 2022. (6 marks)
Project H of Ascot Manufacturers is involved in the manufacture of laptops and it has a five-day working week of 8 hours per day. Overtime is paid at a rate of normal tariff plus 50%, and work on Sundays and public holidays is paid at normal tariff plus 100%.
The actual hours that S. Mbeki worked for the week ending 29 October 2022 are as follows:

Day Hours
Sunday 3
Monday 9
Tuesday 8
Wednesday 8
Thursday 10
Friday 8
Saturday 5
Additional information:
n Normal hourly wage R150 per hour
n Pension fund based on normal remuneration:  
Employer’s contribution 9%
Employee’s deduction 7.5%
n Medical aid fund:  
Employer’s contribution R900 per week
Employee’s deduction R600 per week
n Unemployment insurance fund based on gross remuneration:  
Employer’s contribution 1%
Employee’s deduction 1%
n Income tax calculated on taxable income 18%


Use the information provided below to calculate the following independently:
1.3.1 Net profit (2 marks)
1.3.3 Marginal income per unit that will enable the project to break even (2 marks)
1.3.2 Break-even quantity if the selling price increases to R130 per unit (4 marks)

Caprice Limited plans to start Project Star and the following are the forecasts for 2024

Sales 50 000 units at R120 per unit
Direct materials cost per unit R36
Direct labour cost per unit R24
Variable selling costs 10% of sales
Manufacturing overhead costs (all fixed) R841 000
Fixed selling and administrative costs R1 040 000

QUESTION 2 (20 Marks)
Prepare the Cash budget of a project of Midas Enterprises for the period 01 February 2024 to 30 April 2024 from the information provided below. (Note: The Cash budget must reflect separate monetary columns for each month.)
1. A favourable bank balance of R7 000 is expected on 31 January 2024.
2. Expected monthly total sales are as follows:

January 5 000
February 5 000
March 4 500
April 5 700

The selling price is R120 per unit. All units produced are sold in the same month.
3. Cash sales comprise 60% of the total sales and a 5% cash discount is granted on all cash sales. The balance of the sales is on credit. Debtors pay in the month after the sale. (Separate entries are required for cash sales and receipts from debtors.)
4. Material purchases are expected to be as follows:

January R260 000
February R240 000
March R216 000
April R300 000

Seventy percent (70%) of the material purchases is for cash and balance is paid for in the following month. Forty percent (40%) of the cash purchases is subject to a 10% cash discount. (Separate entries are required for cash purchases and payments to creditors.)
5. Labour costs amount to R38 per unit and are paid in the month in which it is incurred.
6. Manufacturing overheads are forecast at R36 000 per month but exclude R3 600 per month for
depreciation on machinery. Manufacturing overheads are payable in the month they are incurred.
7. Selling and administrative costs contain a fixed portion of R42 000 per month and a variable component of 20% of the sales value (before any discounts are allowed). These costs are paid by the end of the
applicable month. (One entry only is required for selling and administrative costs.)
8. Equipment with a cost price of R240 000 is to be purchased during February 2024. A deposit of 10% of the purchase price must be paid in the month of the purchase and the balance is payable in ten equal
monthly instalments commencing March 2024.
9. Ten percent (10%) of the sales value (excluding discounts) in excess of R300 000 will be transferred to an investment account at the bank each month.

QUESTION 3 (20 Marks)

Note: Where applicable, use the present value tables that appear in the module guide.
Study the information provided below and calculate the following:
3.1 Payback Period of both projects (expressed in years, months and days). (6 marks)
3.2 Accounting Rate of Return (on average investment) of Project B (expressed to two decimal places).
(4 marks)
3.3 Net Present Value of both projects. The answer must show the present values for each year followed by the calculation of the net present value.
(6 marks)
3.4 Internal Rate of Return of Project B (expressed to two decimal places). The answer must
include the calculation of two net present values (using consecutive rates/percentages) and interpolation. (4 marks)

You are required to do an analysis of two proposed capital investment projects. Details of initial investments, scrap values and net cash flows are presented below. The company uses a discount rate of 15% when evaluating projects.

  Project A Project B
Initial investment R600 000 R600 000
Scrap value (not included in the figures below) R20 000 0
Net cash flows:    
Year 1 R310 000 R220 000
Year 2 R220 000 R220 000
Year 3 R190 000 R220 000
Year 4 R180 000 R220 000

The profit per year for Project B was R70 000.

Answers to Above Questions on Financial Accounting

Answer 1: The first-in-first-out (FIFO) method of inventory valuation to complete the following table for the purchases and issues of components stated is performed as follows:


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