FINAL ONLINE SUMMATIVE ASSESSMENT

PROGRAMME Bachelor of Commerce in Financial Management

MODULE Introduction to Financial Management

YEAR One (1)

INTAKE January 2024 Semester 1

DATE 24 May 2024

TOTAL MARKS 100

 Answer ALL questions. (100 MARKS)

QUESTION 1 (20 Marks)

1.1
REQUIRED
Use the information provided below to prepare the Materials Purchases Budget of Lunar
Limited for 2025. (5 marks)
INFORMATION
The required production of Lunar Limited for 2025 for the only product that it manufactures is 5 000
units. Four kilograms of direct materials are required for each unit produced. The direct materials
inventories on 01 January 2025 and 31 December 2025 are expected to be 3 000 kilograms and 5 000
kilograms respectively. The expected purchase price is R6 per kilogram.

1.2
REQUIRED
Study the information given below and determine the cost (as a percentage, expressed to
two decimal places) to Tissot Traders of not accepting the discount. (5 marks)
INFORMATION
Tissot Traders purchased inventory on credit from JKL Manufacturers. The credit terms offered by the
manufacturer were 3/12 net 60 days.
1.3
REQUIRED
Use the information provided below to provide an interpretation of each of the following ratios:
1.3.1 Inventory turnover (2 marks)
1.3.2 Debtors collection period (2 marks)
INFORMATION
The credit term offered by Reno Supermarket to its debtors were 30 days. The following ratios were
calculated for 2023 and 2022:
Ratio 2023 2022
Inventory turnover 6 times 9 times
Debtors collection period 39 days 28 days

1.4
REQUIRED
Use the information provided below to calculate the following:
1.4.1 Closing inventory as at 31 March 2024 (2 marks)
1.4.2 Cost of goods available for sale during March 2024 (2 marks)
1.4.3 Gross profit for March 2024 (2 marks)
INFORMATION
You are provided with the inventory record of Trendy Traders, which sells smartwatches, for the month
ended 31 March 2024. The business uses the specific identification method to value inventories.
Inventory record of smartwatches for the month ended 31 March 2024
Model Unit Inventory on Purchases Sales
Cost 01 March 2024
R Units Units Units Price (R)
Huawei 4 000 100 300 320 6 000
Samsung 5 000 160 400 460 7 000
Garmin 6 000 120 250 220 8 000
380 950 1 000
QUESTION 2 (20 Marks)

2.1 REQUIRED
Use the information provided below to calculate the following:
2.1.1 The number of units that must be produced for January, February and March
2025 (6 marks)
2.1.2 The total production cost for March 2025 (3 marks)
2.1.3 Cost of sales for February 2025. (3 marks)
INFORMATION
The information given below was supplied by Connor Manufacturers.
The expected sales for January to April 2025 are as follows:
Month Units
January 10 000
February 12 000
March 11 000
April 15 000

Finished units equal to 40% of the sales of the following month is expected to be in inventory at
the end of each month.
Manufacturing costs per unit for January and February 2025 include direct materials (R30), direct
labour (R20) and manufacturing overheads (R10). Administration and marketing costs for January
and February are budgeted at R13 per unit. All manufacturing and non-manufacturing costs are
expected to increase by 10% with effect from 01 March 2025.
2.2
REQUIRED
Use the information provided below to prepare the Pro Forma Statement of Comprehensive Income for
the year ended 31 December 2024. The statement must include the gross profit, operating profit, profit
before tax and profit after tax.
(8 marks)
INFORMATION
The following figures have been extracted from the Statement of Comprehensive Income of Becker
Limited for the year ended 31 December 2023:
R
Sales 1 600 000
Cost of sales 960 000
Operating expenses 384 000
Interest expense 32 000

Additional information
1. The sales forecast for the year ended 31 December 2024 is R2 000 000.
2. Becker Limited uses the percentage-of-sales method to prepare its Pro Forma Statement of
Comprehensive Income.
3. The company has identified cost of sales, operating expenses and interest expense as varying in
proportion to sales.
4. Company tax is calculated at 27% of the profit before tax.
 QUESTION 3 (20 Marks)

3.1
REQUIRED
With the use of TWO (2) appropriate ratios (expressed to two decimal places), comment
on the ability of RS Traders to honour its short-term obligations. (6 marks)
INFORMATION
The following information was extracted from the Statement of Financial Position of RS Traders as at
31 December 2023:
R
Bank overdraft 80 000
Accounts payable 320 000
Cash 8 000
Accounts receivable 330 000
Inventories 480 000

3.2
REQUIRED
Use the information provided below to calculate the Economic Order Quantity for 2025. (4 marks)
INFORMATION
Simplex Limited anticipates sales of 7 500 units per month for 2025, a purchase price of R21.60 per
unit, order cost of R12 per order and a carrying cost of 10% of the unit cost price.
3.3
REQUIRED
Prepare an extract of the Statement of Comprehensive Income that reflects, amongst others, the value
of closing inventory as at 31 March 2024 and the gross profit for the month ended 31 March 2024 using
the following methods of inventory valuation:
3.3.1 Last-in-first-out (5 marks)
3.3.2 Weighted average cost (with the weighted average cost per unit expressed to
the nearest cent). (5 marks)
INFORMATION
The following transactions of Sigma Traders took place during March 2024 in respect of the only product
that it sells:
Date Transactions
01 Opening inventory 800 units @ R15 per unit
10 Purchased from a supplier 8 000 units @ R14 per unit
16 Purchased from a supplier 1 200 units @ R13 per unit
31 Sales during May 8 500 units @ R24 per unit
QUESTION 4 (20 Marks)

REQUIRED
Use the information provided below to calculate the following independently:
4.1 Break-even value, using the marginal income ratio (4 marks)
4.2 Margin of safety (as a percentage, expressed to two decimal places), using the
break-even quantity (4 marks)
4.3 The sales volume required to achieve a net profit of R1 200 000 (4 marks)
4.4 The total Marginal Income and Net Profit/Loss if the sales volume is 10% less than
expected (4 marks)
4.5 Break-even quantity if the selling price drops by R20 per unit and the total fixed
costs are R992 200. (4 marks)

INFORMATION
Forecasted costs for the only product to be manufactured by Vierra Enterprises for 2025 are as follows:
R
Fixed manufacturing overheads 600 000
Variable manufacturing overheads 800 000
Direct materials 2 400 000
Direct labour 1 000 000
Fixed selling and administrative costs 400 000
Sales commission 10% of the sales price

Expected production and sales for 2025 are 12 000 units with a selling price of R500 per unit.
 QUESTION 5 (20 Marks)
5.1
REQUIRED
Use the information provided below to determine the optimum mix of products that should
be produced. Also indicate the total contribution that would be earned by Ryobi Limited. (8 marks)
INFORMATION
Ryobi Limited produces three products viz. Product A, Product B and Product C. The following
information relates to the contribution, materials usage, expected demand and the materials availability
for the month in respect of three products that it manufactures:
Product A Product B Product C
Sales price per unit R40 R30 R20
Variable cost per unit R16 R10 R8
Materials required per unit of output 12 kilograms 4 kilograms 2 kilograms
Estimated sales demand 1 000 units 1 250 units 1 100 units

Availability of materials is limited to 16 200 kilograms for the month.

5.2
REQUIRED
Study the information provided below and answer the following questions:
5.2.1 Does Sabrina Limited have spare capacity to accept the special order? Motivate
your answer. (2 marks)
5.2.2 Should the company accept the special order? Show all the relevant calculations. (6 marks)
5.2.3 Explain TWO (2) possible negative consequences to Sabrina Limited of accepting
the special order if a profit is expected from the sale. (4 marks)
INFORMATION
Sabrina Limited expects to manufacture 40 000 units of Product J, using 80% of its normal capacity.
The costs to manufacture 40 000 units of Product J are as follows:
R
Fixed manufacturing overheads 400 000
Variable manufacturing overheads 84 000
Direct materials cost 288 000
Direct labour cost 224 000
Variable marketing costs 76 000
Fixed marketing and administrative costs 710 000

The selling price is R45 per unit. However, a customer has offered to pay R28 per unit for an additional
9 000 units.

END OF PAPER
TOTAL: 100 MARKS