ACN3175/202/3/2008 ACN3073/202/3/2008
DEPARTMENT OF MANAGEMENT ACCOUNTING FINANCIAL PLANNING AND CONTROL
TUTORIAL LETTER 202/2008 FOR ACN3175/ACN3073 Dear Student Enclosed please find the solutions in respect of assignment 02/2008. It is in your own interest to work through the suggested solution in conjunction with the assignment and your own answer. With kind regards Telephone number L R Nolte M Lötter
(Mrs)
012 429 4046
Room number 1 – 39
E-mail
[email protected]
012 429 4321
1 – 37
[email protected]
LECTURERS : ACN3175/ACN3073 ANNEXURE :
SUGGESTED SOLUTION - ASSIGNMENT 02/2008
2 ANNEXURE: SUGGESTED SOLUTION - ASSIGNMENT 02/2008 OCTOBER 2006: EXAMINATION PAPER QUESTION 1 (27 marks) (32 minutes) GLOLAC LIMITED Calculation of the annual equivalent cash outflows Gas powered forklift
Cost Cash operating expenses Salvage value Tax benefit
0 R (450 000) -
c
e
d
Factor @ 12% (Table B;Table A) Present values Total present value Factor for 5 years (Table B @ 12%) Annual equivalent cost = =
Years 1–4 R (157 250)
5 R (157 250)
-
-
45 000
-
74 175
60 675
(450 000) 1.000
(83 075) 3.037
(51 575) 0.567
(450 000) (R731 542) 3.605 R(731 542) 3.605 R(202 924)
(252 299)
(29 243)
(13) Electric powered forklift
Cost Cash operating expenses Salvage value Tax benefit
e
d
Factor @ 12% Present values
c
0 R (620 000) -
Years 1-5 R (125 000)
6 R (249 000)
-
-
60 000
-
74 700
56 700
(50 300) 3.605 (181 332)
(132 300) 0.507 (67 076)
(620 000) 1.000 (620 000)
(13) Total present value Factor for 6 years (Table B @ 12% Annual equivalent cost
R(868 408) 4.111 = R(868 408) 4.111 = R(211 240)
ACN3175/202 ACN3073/202
3 QUESTION 1 (continued) Conclusion
The gas powered forklift has the lowest annual equivalent cash outflow and should be chosen. This will all be subject to the annual operating expenses maintaining their trend as estimated at the time of exercising this choice. (1) Calculations c
Annual cash operating expenses
Gas powered
Annual operating expenses Less: Depreciation (wear and tear) - R(450 000 x 20%) - R(620 000 x 20%)
1-5 R (247 250)
(6) R (249 000)
124 000 (125 000)
(249 000)
90 000 (157 250)
d
Forklift Electric powered 1–5 R (249 000)
Tax benefit
Cash operating expenses Annual wear and tear: R(450 000 x 20%) Wear and tear recouped Tax deductible expenses Tax benefit @ 30%
Gas powered forklift Years 5 1–4 R R (157 250) (157 250) (90 000) (90 000) 45 000 (247 250) (202 250) 74 175 60 675
4 QUESTION 1 (continued)
Cash operating expenses Annual wear and tear: R(620 000 x 20%) Wear and tear recouped Tax benefit @ 30%
Electric powered forklift Years 1–5 6 R R (125 000) (249 000) (124 000) 60 000 (249 000) (189 000) 74 700 56 700
e
Cost Less: Total Depreciation [5 years @ 20% p.a] - R(450 000 x 20%)x 5 - R(620 000 x 20%) x 5 Book value – end of useful life Salvage value (wear and tear recouped)
Forklift Gas powered Electric owered R R 450 000 620 000 450 000 620 000 Nil 60 000
Nil 45 000
QUESTION 2 (28 marks) (34 minutes) GYRO LIMITED Net present values of after-tax cash flows Proposal 1 – Lease agreement
Capital Lease payments Taxation benefit Factor @ 12% Present values Net present value
0 R 850 000 (305 000) 545 000 1.00 545 000 (106 115)
Years 1–3 R (305 000) 26 825 (278 175) 2.402 (668 176)
4 R 26 825 26 825 0.636 17 061 (8)
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5 QUESTION 2 (continued) Or
Capital Lease payments Taxation benefit Factor @ 12% Present values Net present value
0 R 850 000 (305 000) 545 000 1.00 545 000 R(106 115)
Years 1 2 3 R R R (305 000) (305 000) (305 000) 26 825 26 825 26 825 (278 175) (278 175) (278 175) 0.893 0.797 0.712 (248 410) (221 705) (198 061)
4 R 26 825 26 825 0.636 17 061 (8)
PROPOSAL 2 – LOAN
Capital – Loan Annual repayments Annual maintenance Tax benefit Net after tax cash flow Factor @ 12% Present values Net present value
0 R 850 000 850 000 1.00 850 000 R(8 232)
Years 1 2 3 4 R R R R (291 695) (291 695) (291 695) (291 695) (21 000) (21 000) (21 000) (21 000) 40 600 33 589 25 596 16 484 (272 095) (279 106) (287 099) (296 211) 0.893 0.797 0.712 0.636 (242 981) (222 447) (204 414) (188 390) (15)
Conclusion Proposal 2 with the lowest negative net present value must be selected, the cost of financing this proposal is the lowest. (1) Calculations c
Tax benefit – Lease agreement Years Lease payments Wear and tear forfeited Benefit of leasing over buying Tax benefit @ 29%
1 -3 R (305 000) 212 500 (92 500) 26 825
4 R (305 000) 212 500 (92 500) 26 825
6 QUESTION 2 (continued) d
Wear and tear forfeited – leasing Purchase price (cost) Wear and tear @ 25% per annum
e
R850 000 R212 500
Loan – Annual repayment Payment =
f
Amount to be financed PV of R1 p.p. @ 14% for 4 years
=
R850 000 2.914
=
R 291 695 (To the nearest R)
Interest paid on loan agreement Year 1 2 3 4 5
g
Capital outstanding Interest @ 14% R R 850 000 119 000 677 305 94 823 480 433 67 261 255 999 35 840 144* -
Instalment R 291 695 291 695 291 695 291 695 -
*(Rounding off difference)
(4)
Taxation benefit Years 1
Interest paid Maintenance paid Total payments deductible Tax benefit @ 29%
R 119 000 21 000 140 000 40 600
2 R 94 823 21 000 115 823 33 589
3 R 67 261 21 000 88 261 25 596
4 R 35 840 21 000 56 840 16 484
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7 QUESTION 3 (27 marks) (32 minutes) BETABUILD (a)
Costs incurred for painting and decorating:
Direct material Direct labour
c
d
Variable overheads
e
2006 54 000
2007 56 700
72 900
78 003
27 540
29 192
f
Fixed overheads: Avoidable Depreciation Head office – administrative costs c
Direct material: Number of houses each year: Direct material for 270 houses
d
Direct labour: For 2006: = For 2007: =
16 848 11 232 28 080
=(500 x 30%) + (600 x 20%) =270 houses =
R200 x 270 for 2006 = R54 000 for 2007 = R54 000 x 105% = R56 700
R270 x 270 houses = R72 900 R72 900 x 107% = R78 003
③ Variable
overheads: Total overheads per house
= = = =
Material related + Labour related (R200 x 20%) + (R270 x 100%) R40 + R270 R310
Of which (30% x R40) + (⅓ x 270) = variable = R12 + R90 = R102 variable overhead per house Variable overhead
for 2006: for 2007:
= =
R102 x 270 R27 540 x 106%
= =
R27 540 R29 192
8 QUESTION 3 (continued) f
Fixed overheads: Total overheads per house – variable overheads per house = fixed overheads R310 - R102 = R208 per house Therefore: Total for 2006 = R208 x 270
=
R56 160
Consisting of: Only for 2006 Avoidable fixed overheads Depreciation Head office
(30% x R56 160) (20% x R56 160 (50% x R56 160)
= = =
R16 848 R11 232 R28 080
Cash Budget for the painting and decorating function 2006 R Direct materials payments to creditors: Previous year creditors (2006:given) (2007:90% x R54 000 x 10%) Current year [90% x (90% x R54 000)(a)] [90% x (90% x R56 700)(a)] Cash purchases (2006:10% x R54 000(a)) (2007:10% x R56 700(a)) Direct labour payments: Previous year accruals (2006: given) (2007: 4% x R72 900) Current year (2006: 96% x R72 900(a)) (2007: 96% x R78 003(a)) Variable overhead: Previous year (2006: given) (2007: 40% x R27 540/12) Current year 2006: 2007: Fixed overhead: Avoidable Head office – administration costs (No depreciation – not cash flow) (i)
Variable overhead cash expense
2006
= R27 540/12 = R2 295 per month
2007 R
2 100 4 860 43 740 45 927 5 400 5 670 2 800 2 916 69 984 74 883 600 26 622(i)
16 848 28 080 196 174
918 28 223(i) Excluded Excluded 163 397
9
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QUESTION 3 (continued) Then:
2007 Then:
R2 295 x 11 months = R25 245 + (60% x R2 295) = R25 245 +R1 377 = R26 622 = R29 192/12 = R2 433 per month R2 433 x 11 months = R26 763 + (60% x R2 433) = R26 763 + 1 460 = R28 223
(27)
QUESTION 4 (18 marks) (22 minutes) Multiple choice questions 1. 2. 3.
The correct answer is (4) All the statements are correct.
(3)
The correct answer is (4) All the statements are correct.
(3)
Nominal value Underwriting cost Cash value Dividend Component cost
= R100.00 = R5.50 = R94.50 = R10.00 = R10.00 x 100 R94.50 1 = 10.58%
The correct answer is alternative (3) 4.
Use high – low method to determine the variable overheads R272 640 - R247 680 R 24 960
(3) 2400 machine hours 1920 machine hours 480 machine hours
R24 960 480 =
R52 per machine hour is variable
Variable overheads for a normal month = 2 400 machine hours x R52 = R124 800 The correct answer is alternative (2)
(3)
10 QUESTION 4 (continued) 5.
Fixed selling and administrative expenses variance for September 2006; Actual cost R20 000
Budgeted cost 264 000 ÷ 12 = R22000 R2000(f) Expenditure variance
The correct answer is alternative (1) 6.
(3)
Variable selling and administrative expenses volume variance for September 2006. Standard cost based on actual sales @ std SP
Budgeted expenses
5% (450 000 x R1.80) = R40 500
5% x R792 000 = R39 600
R900(U) Volume variance The correct answer is alternative (4)
(3)
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11 OCTOBER 2007 : EXAMINATION PAPER QUESTION 5 (30 marks) (36 minutes) DECORATIVE CATERER Determination of the machine to be purchased Machine - Rustic
Cost Sales c Variable baking & icing cost d Fixed cost Realisable value Taxation payable e Annual cash in/(outflow) Factor @ 16% Present value cash in-/(out)flow Net present value Annual equivalent income = =
0 R (960 000) (960 000) 1.000 (960 000) R484 987
Years 1-4 R 1 360 800 (680 400) (160 000) (81 316) 439 084 2.798 1 228 557
5 R 1 360 800 (680 400) (160 000) 120 000 (185 716) 454 684 0.476 11 216 430
R 484 987 3.274 R148 133
(15)
Machine – Roster
Cost price Sales h Variable baking & icing cost i Fixed cost Additional purchases k Taxation payable j Realisable value-end of useful life Annual cash in/(outflow) Factor @ 16% Annual cash in/(outflow) Net present value
0 R (1 100 000) (1 100 000) 1.000 (1 100 000) R430 577
Annual equivalent income =
R430 577 2.798
=
R153 887
Years 1–2 R 1 440 000 (684 000) (200 000) (81 490) 474 510 1.605 761 589
3 R 1 728 000 (807 500) (200 000) (17 500) (124 120) 578 880 0.641 12 371 062
4 R 1 728 000 (807 500) (200 000) (17 500) (182 120) 200 000 720 880 0.552 12 397 926
(15)
12
QUESTION 5 (continued) Conclusion Machine Roster must be acquired as it results in the highest annual equivalent income, taking into account the differing useful lives of the proposed machines. Calculations Machine - Rustic
c
Estimated annual sales Sales units 40 000 38 000 36 000
Probability 0.20 0.50 0.30 1.00 Annual sales =
Total units 8 000 19 000 10 800 37 800
R(37 800 x 36) = R1 360 800
d
R(37 800 units x 18.00) = R680 400
e
Taxation payable Years Sales c Variable baking & icing cost d Fixed cost Wear and tear f Realisable value-end of useful life Tax payable @ 29%
f
1–4 R 1 360 800 (680 400) (160 000) (240 000) 280 400 81 316
Wear and tear Cost price Wear & tear @ 25% p.a.
g
5 R 1 360 800 (680 400) (160 000) 120 000 640 400 185 716 R 960 000 240 000
Taxation recouped on wear and tear Cost price Wear & tear @ 25% p.a.;- R(960 000 x 25%) x 4 Tax (book) value of end of useful life Realisable value at end of useful life Tax recouped – R(120 000 x 29%) =
R 960 000 960 000 nil 120 000 34 800
ACN3175/202 ACN3073/202
13
QUESTION 5 (continued) Machine - Roster
h
Sales Years 1 – 2 - units 3 – 4 - units @ R40.00 per unit
i
1-2 36 000 R1 440 000
3-4 (+20%) 43 200 R1 728 000
Variable baking & icing cost 36 000 x 19.00 * 42 500 x 19.00
R684 000 R807 500
*(Maximum per annum is 42 500)
j
Taxation payable
Sales h Variable baking & icing cost i Fixed cost Additional purchases k Wear & tear l Realisable value Taxable income Tax payable @ 29%
k
1-2 R 1 440 000 (684 000) (200 000) (275 000) 281 000 81 490
Additional purchases
Sales (36 000 x 1.20) Maximum annual baking capacity Units to be purchased (annually)
ˆ l
Years 3 R 1 728 000 (807 500) (200 000) (17 500) (275 000) 428 000 124 120
R(700 x 25) = R17 500
Wear and tear R(1 100 000 x 25%) = R275 000 p.a.
Years 3–4 43 200 42 500 700
4 R 1 728 000 (807 500) (200 000) (17 500) (275 000) 200 000 628 000 182 120
14
QUESTION 5 (continued) 11
Table B – years 1 – 4 @ 16% Table A – year 5 @ 16%
= 2.798 = 0.476
12
Table B – years 1 – 2 @ 16% Table A – year 3 @ 16% Table A – year 4 @ 16%
= 1.605 = 0.641 = 0.552
QUESTION 6 (25 marks) (30 minutes) BIG DEEP MINING COMPANY Alternative 1 (a)
Suspensive sale agreement Years
Cost of asset (capital)
0
1
2
3
4
5
R
R
R
R
R
R
-
-
-
-
-
(25 590)
(25 590)
(25 590)
(25 590)
(25 590)
(6 000)
(6 000)
(6 000)
(6 000)
5 133
4 609
4 018
3 349
2 593
(26 457)
(26 981)
(27 572)
(28 241)
(22 997)
0.783
0.693
0.613
(21 126)
(19 107)
(17 312)
90 000
Instalments (capital and
-
interest) c Insurance cost
(6 000)
Tax benefit d
-
Net after tax cash flows
84 000
Factor @ 13%
1.000
Present values
84 000
Net present value
0.885 (23 414)
-
0.543* (12 487)
84 000 – 93 446 = -9 446
(152)
c
Instalment calculation:
Instalment =
=
Amount to be financed PV of R1 pp factor @ 13% for 5 years *
R 90 000 3,517
= R25 590
ACN3175/202 ACN3073/202
15
QUESTION 6 (continued) * Formula: Table B 1 1(1 + i )n i
=
1 − 0,543 0.13
=
3.517
OR
Table A year 5 =
1 (1 + i )n
=
1 (1.13 )5
=
1 1.842
=
0.543
Then factor year 1 + year 2 + year 3 + year 4 + year 5 = 0,885 + 0,783 + 0,693 + 0,613 + 0,543 = 3.517
d
Tax benefit on interest and insurance
Interest ** Insurance
1 R 11 700 6 000
2 R 9 894 6 000
Years 3 R 7 854 6 000
Tax deductible amounts Tax @ 29%
17 700 5 133
15 894 4 609
13 854 4 018
4 R 5 548 6 000
5 R 2 943 6 000
11 548 3 349
8 943 2 593
16
QUESTION 6 (continued) ** Interest calculations: Year
Balance beginning
Instalment
Balance end of year
of year
Interest @ 13%
R
R
R
R
1
90 000
11 700
25 590
76 110
2
76 110
9 894
25 590
60 414
3
60 414
7 854
25 590
42 678
4
42 678
5 548
25 590
22 636
5
22 636
2 943
25 590
(11) due to rounding
Alternative 2 Lease After tax cost of lease 0 R 90 000 90 000 1.000 90 000
Cost of machine if installed Annual lease payments Tax benefit e Total cash flow Factor @ 13% Present values @ 13% Net present value
Years 1-4 R (29 000) 1 885 (27 115) 2.974 (80 640)
5 R (29 000) 8 410 (20 590) 0.543 (11 180)
90 000 – 91 820 = -R1 820
(b) Total cash flow Factor @ 18% Present values @ 18% Net present value
90 000 (27 115) 1.000 2.690 90 000 (72 939) 90 000 – 81 937 = R8 063
(20 590) 0.437 (8 998)
(62) Interpolation to find internal rate of return (after tax cost of the lease) − 1 820 − 0 × 5% − 1 820 − (8 063 )
=
13% +
=
13% + [0.184 × 5%]
=
13% + 0.920
=
13.92%
(3)
ACN3175/202 ACN3073/202
17
QUESTION 6 (continued) e
Tax benefit on lease payment Years
Lease payments deductible
1-4
5
R
R
29 000
29 000
(22 500)
-
Advantage of leasing over buying
6 500
29 000
Tax benefit on advantage @ 29%
1 885
8 410
Wear and tear forfeited (90 000 x 25/100)
Conclusion as regards (a), choice of alternative according to net present values. Alternative 1 NPV = -R9 446 Alternative 2 NPV = -R1 820 Choose alternative 2 (lease) with the least negative NPV.
QUESTION 7 (28 marks) (34 minutes) CRUSTY LIMITED (a)
Budgeted income statement for the month that ended on 30 September 2007 R Sales
(10 000 x 462.50) d
Cost of sales
4 625 000 3 700 000
Production cost
3 700 000
Materials
1 750 000
- Siv
(10 000 x 10 x 5)
500 000
- Lon
(10 000 x 5 x 25)
1 250 000
Labour (10 000 x 5 x 15)
750 000
Production overheads (10 000 x 5 x 24) Gross profit
1 200 000 925 000 (7)
18
QUESTION 7 (continued) (b)
Variances Materials Actual cost of purchases
Standard cost of actual purchases
Purchase Price R
R
R
- Siv
95 000 kgsâ @ R6 per kg
570 000
95 000 (u)
95 000 kgsâ @ R5 per kg
- Lon
47 500 kgsâ @ R24 per kg
1 140 000
47 500 (f)
47 500 kgsâ @ R25 per kg 1 187 500
1 710 000
47 500 (u)*
142 500 kg
475 000 1 662 500
[* given – already calculated]
Standard cost of actual input
Mix
Actual input in standard ratio
Yield
@ standard price R Siv - 96 000 kg @ R5,00 per kg
R
480 000
RNil
Lon - 48 000 kg @ R25.00 per kg 1 200 000
RNil
Standard cost of the actual output
R
R
96 000 kg f @ R5 per kg = 480 000 48 000 kg @ R25 per kg
9 500 units at R175 g p.u = 1 662 500
= 1 200 000
144 000 1 680 000
RNil *
1 680 000 Mix - RNil
1 662 500 Yield – R17 500(u)
(4) [* Given – already calculated] Labour Actual cost
Std Cost: Actual Input
R 46 000 hours @ R16.00 = 736 000 46 000 hrs @ R15.00 per hour per hour
Rate R46 000(u)*
Std cost: Actual Output R = 690 000
9 500 units @ R75.00 per unit
R = 712 500
Efficiency R22 500(f)*
[* Given – already calculated] (3)
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19
QUESTION 7 (continued) Production overhead Actual cost
Std Cost: Actual Input
R 46 000 hours @ R25.00 = 1 150 000 per hour
46 000 hrs @ 24.00 per hour
Std cost: Actual Output R = 1 104 000 9 500 units @ R120.00 per unit
Rate R46 000(u)
R = 1 140 000
Efficiency R36 000(f)*
[* Given – already calculated] (2) Sales Actual sales @ standard price
Actual sales R4 833 125
9 500 units @ R462.50 per unit
= R4 393750
Price R439 375 (f) (3)
Standard gross profit on actual sales @ standard selling price 9 500 x
4 625 000 x 925 000 10 000
462 500
Budgeted gross profit
R925 000
= 9 500 x 462.50 x 0,20 = R878 750 Volume R46 250 (u) (4)
20
QUESTION 7 (continued) (c)
Reconciliation of budgeted and actual gross profit for September 2007 R Budgeted profit
925 000
Less Sales volume variance-unfavourable
46 250
Standard profit
878 750
Plus Favourable variances
497 875
Labour
– efficiency
22 500
Production overhead – efficiency
36 000
Sales
– price
439 375
Less Unfavourable variances Materials
157 000
– purchase price
47 500
– yield
17 500
– rate
46 000
Production overhead – rate
46 000
Labour Actual gross profit
1 219 625
Calculations
c
Materials
Opening stock
01/09/2007
Plus Purchases ** Less Used in production Closing stock
Siv
Lon
Kg
Kg
4 000
2 000
95 000
47 500
99 000
49 500
96 000
48 000
3 000
1 500
(given)
** (balancing figure)
OR Closing stock
30/09/2007
Plus Used in production Less Opening stock Purchases
3 000
1 500
96 000
48 000
99 000
49 500
4 000
2 000
95 000
47 500
(given)
21
QUESTION 7 (continued) d
Gross profit of 20% on selling price = Gross profit of 25% on cost -
Cost of sales = R3 700 000 (budgeted income statement) Gross profit as a % of cost = R3 700 000 x 25% = R925 000
ˆ
Sales = =
R(3 700 000 + 925 000) R4 625 000
Selling price per unit = R(4 625 000 ) 10 000) = R462,50
e Actual sales
=
R4 625 000 x 9 500 x 1.10 = R4 833 125 10 000
Calculations
f
Actual input:- Siv
96 000 kgs
- Lon
48 000 kgs 144 000 kgs
Standard ratio - Siv - Lon
ˆ
g
10 kgs 5 kgs
Actual input in standard ratio;144 000 kgs x 10/15 = 96 000 kgs – for Siv 144 000 kgs x 5/15 = 48 000 kgs – for Lon
Standard cost per unit;R1 750 000 ) 10 000 = R175.00
h
Actual production overhead rate;R1 150 000 ) 46 000 = R25.00 per hour
i
Production overheads - standard unit cost R(5 x 24.00) = R120.00
ACN3175/202 ACN3073/202
22
QUESTION 7 (continued) Actual income statement for the month that ended on 30 September 2007
R Sales
R(9 500 x 462.50 x 1.10)
4 833 125
Less Cost of sales
3 613 500
- Production cost
3 613 500
- Materials
1 727 500
Stock - 01/09/2007
70 000
- Siv
R(4 000 x 5)
20 000
- Lon
R(2 000 x 25)
50 000
Plus Purchases
1 710 000
- Siv
R(95 000 x 6)
570 000
- Lon
R(47 500 x 24)
1 140 000
Less Stock - 30/09/2007
52 500
- Siv
R(3 000 x 5)
15 000
- Lon
R(1 500 x 25)
37 500
- Labour
R(46 000 x 16)
736 000
- Production overhead
R(46 000 x 25)
1 150 000
Gross profit
1 219 625
ACN3175/202 ACN3073/202
23
QUESTION 8 (17 marks) (21 minutes) MULTIPLE CHOICE QUESTIONS 8.1
Statements 1, 2 and 3 are correct. (Brigham page 66 formula 2-7, page 47 and 53). Statement 4 is incorrect, the formula for Table A = 1/(1 +i)n The correct alternative is (c).
8.2
Formula:
(3)
PV x FV-factor 800 000 x (1 + i)n 800 000 x (1 + 0.06)4 800 000 x 1.2625 R1 009 982
=
Or Financial calculator: 800 000 PV 6 i 4 n +/-Comp FV = 1 009 982 The correct alternative is (b) 8.3
rs
= = = =
(3)
D1/ Po + g R14 x 2/ 180 + 2% 15.56% + 2% 17.56%
The correct alternative is (b). 8.4
Total cost Variable cost Variable cost related to passengers Cost per passenger Plus 2% increase in cost
(3) = = = = = = = = =
R900 000 70% x R900 000 R630 000 60% x R630 000 R378 000 R378 000/800 R472.50 R472.50 x 102% R481.95
Number of passengers for 3 months x Cost per passenger = 200 x R481.95 = R96 390.00 The correct alternative is (d)
(3)
24
QUESTION 8 (continued) 8.5
The correct alternative is (c). Drury page 604.
8.6
Statements 1, 2 and 3 are correct. (See study guide p. 288 to 290) Statement 4 is incorrect. The operating budget’s primary objective is the preparation of the budgeted income statement (profit and loss account). (See study guide p. 291) The correct alternative is (c).
Sbd/ AN3175_2008_TL_202_3_E.doc
(2)
(3)