ACCOUNTING PAPER 2
GRADE 12
NOVEMBER 2020
MEMORANDUM
NATIONAL SENIOR CERTIFICATE

MARKING PRINCIPLES:

1. Unless otherwise stated in the marking guidelines, penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item (no penalty for misplaced item). No double penalty applied.
2. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning marks on the figures for that item.
3. Full marks for correct answer. If answer incorrect, mark the workings provided.
4. If a pre-adjustment figure is shown as a final figure, allocate the part-mark for the working for that figure (not the method mark for the answer). Note: if figures are stipulated in memo for components of workings, these do not carry the method mark for final answer as well.
5. Unless otherwise indicated, the positive or negative effect of any figure must be considered to award the mark. If no + or – sign or bracket is provided, assume that the figure is positive.
6. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates.
7. This memorandum is not for public distribution, as certain items might imply incorrect treatment. The adjustments made are due to nuances in certain questions.
8. Where penalties are applied, the marks for that section of the question cannot be a final negative.
9. Where method marks are awarded for operation, the marker must inspect reasonableness of answer.
10. Operation means 'check operation'. 'One part correct' means operation and one part correct. Note: check operation must be +, -, x, ÷, or per memo.
11. In calculations, do not award marks for workings if numerator & denominator are swapped – this also applies to ratios.
12. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. Indicate with a .
13. Be aware of candidates who provide valid alternatives beyond the marking guideline. Note that one comment could contain different aspects.
14. Codes: f = foreign item; p = placement/presentation.
    These marking guidelines consist of 10 pages.

QUESTION 1
1.1 VAT
1.1.1

1. 89 700 – 78 000
   Answer: 11 700
2. 12 400 x 15% or 15/100
   one mark for both figures only if all workings are correct
   and no other operations done
   & if there is no final answer
   Answer:1 860 
3. 210 x 115/15 OR 1 400 + 210
   one mark for both figures only if all workings are correct and no other operations done & if there is no final answer
   1 610
4. 149 500 two marks
   (158 700 – 9 200)  x 15/115
   OR 20 700 – 1 200
   two marks one mark
   Answer:19 500    must be x by 15/115 & one other part correct
   (9)

1.1.2 Comment on this practice and provide Amahle advice.

1.2 CREDITORS' RECONCILIATION
Accept brackets for negative amounts or Dr (-) and Cr (+) in the CL and Dr (+) and Cr (-) on the statement
1.2.1

*Both totals: inspect. Must include opening balances; can be different amounts
-1 for foreign items per line provided a mark is scored on that line
(i.e. max could be -6) accept fully correct answers on wrong lines
1.2.2 What should the owner say to Bradley regarding this incident? Explain TWO points.
Any TWO valid explanations ✓✓   ✓✓part marks for incomplete / unclear / partial answers
Do not accept theft or firing / drawings as an explanation

• He should not take advantage of his position in management / abuse of authority / possible conflict of interest
• This can be viewed as wrong (i.e. unethical or devious)
• Against business policy i.e. all transactions must be authorised and documented / compromising internal controls
• He must pay back the money / he could open an account with the business and purchase the goods
• He could negotiate with the owner in advance to get a special price or at cost
• He could be liable for disciplinary action (warning) and could tarnish his good reputation
• Suspension / warning of dismissal / demotion will be considered (if caught again).

(4)
TOTAL MARKS:25

QUESTION 2
2.1 PERFECT FIT MANUFACTURERS
2.1.1 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2021
For misplaced items, award part-marks for workings but not on answer

(14)
2.1.2 Calculate: Gross profit earned on sale of shirts.
see 2.1.1     400 x 420
4 860 000 – (342 000 + 3 192 000  – 168 000 )
3 366 000 three marks
OR: (900 x 220) + (7 200 x 180)
one mark one mark one mark one mark
198 000 two marks 1 296 000 two marks
ALSO: Accept T-account
Answer:
1 494 000 one part correct Must be Sales – COS
2nd method:
Must be 2 batches

Calculate: Mark-up % achieved on shirts
see 2.1.2 above
1 494 000 x 100 3 366 000 see 2.1.2
(342 000 + 3 192 000 – 168 000)
Inspect correct transfer of totals from above;
x 100 is not ‘one part correct’ for the method mark
OR: 3 366 000 x (100+y/100) = 4 860 000 y = 44,4%
Answer:
44,4%
one part correct must be GP ÷ COS
Sign not needed

2.2 LEATHER MANUFACTURERS
PURSES:
2.2.1 Calculate the break-even point for purses for the year ended 28 February 2021.
R936 000 
R295 – R255 
R40 two marks
Answer:
23 400 units  one part correct must be FC ÷ Contrib/u
Must not be R, c, % etc
Assume units if no other sign

2.2.2 Comment on the level of production achieved and the break-even point for purses for 2021. Quote figures.
Compulsory response: Do not mark optional responses if marks are earned on compulsory response
Comparison of BEP to level of production for 2021 ✓✓ Figures ✓✓
Optional responses: Max two marks in total (mark one optional response only)
Comparison of BEP 2021 to 2020 with figures
OR: Comparison of Production 2021 to 2020 with figures

Expected responses for 4 marks:

• The business produced 600 units more than break-even / profit on 600 units / R24 000 extra profit
• BEP compared to production reflects a profit on 600 units in 2021 compared to a profit on 1 100 units in 2020 / this is a decrease in profits on 500 units (1100 – 600) in 2021 compared to 2020

Expected response for 2 marks in total:
Production increased by 2 000 units (24 000 – 22 000) / to 24 000 units / by 9% and/or BEP increased by 2 500 units (23 400– 20 900) / to 23 400 / by 12%

2.2.3 Apart from inflation and wage increases, provide TWO other possible reasons for the increase in the direct labour cost per unit for purses.
TWO valid reasons✓✓  ✓✓ Explanations not needed

• Overtime paid at higher rates endorsed or approved / bonus for good performance or extra time / negotiate higher fringe benefits / targets not met during normal time / overtime was needed to meet targets
• Low productivity of workers (not productive or efficient)
• Interruptions (due to malfunctioning machines / load-shedding / COVID-19 lockdown
• Higher qualifications of workers / employed higher-skilled workers
• Poorly trained workers / lack of supervision / time wasted in re-doing work.

Do not accept: Employ more workers (their inefficiency is the problem) / increase in demand
2.2.4 Give TWO reasons for the decrease in the direct material cost per unit for purses.
Any TWO valid reasons ✓✓

• Cheaper (new) or local suppliers used
• Took advantage of bulk discounts / negotiated discounts
• Better supervision / less wastage / better control over issuing / use of material
• Better cutting methods / use patterns or technology / better skilled workers / better training of workers
• Cheaper transport costs / petrol costs / using own transport

JACKETS:
2.2.5 Explain why the direct material cost per unit for jackets would probably increase if raw material is imported. State TWO points.
TWO valid points ✓✓

• Additional / increase in transport costs e.g. freight, shipping
• High quality material not available locally
• Custom duties / import duties / taxes
• Better packaging
• Different / weak exchange rate

Related Items

Provide figures to prove that Tello was correct about the effect this decision would have on the cost of the jackets.
Direct material cost per unit increased (from R180) to R360 / by 100% / by R180 / it doubled. (Note: could mention effect on total Variable Cost).
2.2.6 Calculate the % increase in the selling price of the jackets.
1 170 – 780
390 x 100
780     1
x 100 is not ‘one part correct’ for the method mark
50% one part correct must be expressed as percent sign not necessary difference in SP must be numerator
2.2.7 Explain the impact of the increase in the selling price of jackets on the sales and profit. Quote figures or calculations.
ONE reason ✓✓ part marks for incomplete / unclear / partial answers figures ✓✓

• Units produced and sold decreased by 2 719 units / (from 6 350) to 3 631 / by 42,8%.
• The BEP dropped by 1 250 units / from 5 000 to 3 750 / by 25%
• Made loss on 119 units in 2021 and profit on 1 350 units in 2020 / sales dropped from R4 953 000 to R4 248 270 / by R704 730 / by 14,2%

For candidates who pick up the reversed figures in BEP/Production:

• OR 1 250 units less / from 5 000 – 3 750 / by 25%
• OR 2 719 units less / from 6 350 – 3 631 / by 42,8%
• OR Made a loss on1 350 units in 2020 and a profit on 119 units in 2020 / sales increased from R3 900 000 to R4 387 500 / by R487 500 / by 12,5%

2.2.8 Tello wants to increase profits on jackets by an additional R250 000 in the next financial year. Assuming the cost structure remains the same, calculate the total number of additional units he must produce to achieve this target. Note: mark this question independently of Q2.2.7
250 000 Accept 4 163 two marks –3 631 one mark
    470 (1 706 250 + 250 000) ÷ 470
1 170 – 700
ALTERNATIVE: For candidates who pick up reversed figures in BEP and production i.e. move from loss to profit; Do not penalise for using / not using a previous loss.
OR: 532 + 119 OR: 250 000 + 55 930
                                         470
OR: Use BEP calculation to calculate the units
Accept 4 163 two marks –3 750 one mark
(1 706 250 + 250 000) ÷ 470
532 units one part correct
OR: 651 units
OR: 413 units
TOTAL MARKS
(50)

QUESTION 3
3.1 DEBTORS' COLLECTION SCHEDULE FOR MARCH TO MAY 2021 *one part correct

3.2 AMOUNTS FOR THE CASH BUDGET *one part correct

1. Cash sales for April
   630 000 x 35%
   April credit sales
   OR: 630 000 – 409 500 OR: 360 000 x 175/100 x 35%
   one mark one mark ( one mark ) one mark
   OR: 409 500 x 35/65
   one mark one mark
   Amount:
   R220 500
   Accuracy mark to deal with part-mark inconsistency
2. Increase in loan from Janet Bloom
   (2 625 – 1 365)
   1 260 ÷ 0,09 x 12
   Be alert to different method of calculation
   OR 1260 x 100/9 x 12
   OR 1 260 x 12 / 9%
   two marks one mark
   OR 350 000 – 182 000
   (2 625 / 0,09 x 12) – (1 365 / 0,09 x 12)
   Amount:
   R168 000 One part correct
3. Salaries for April 2021
   22 400 x 3/2 x 1,05
   OR: 11 760 x 3
   22 400 / 2 X 1,05
   OR: (11 200 + 22 400) x 1,05
   If assumed that extra assistant did not get the 5% increase, then answer will be:
   22 400 x 105%
   23 520 + 11 200 = 34 720
   two marks one mark
   Be alert to other combinations of figures e.g. R1 120, R23 520, R33 600
   Amount:
   R35 280 One part correct Apply rule 4
4. Rent expense for March 2021
   39 960 x 100/111 OR 39 960 ÷ 111% OR 39 960 ÷ 1,11
   OR 39 960 – 3 960
   Amount:
   36 000  One part correct

3.3 Explain the decisions that the directors took regarding the budgeted and actual expenditure for advertising in May 2021. Quote figures or calculations.
Explanation on budget ✓ Figures ✓ Explanation on actual expenditure ✓ Figures✓
Expected response for 4 marks:

• Advertising budget increased by R18 000 / (from R12 000) to R30 000 / by 150%.
• Actual expenditure on Advertising exceeded the budget by R12 000 / from R30 000 to R42 000 / by 40%

The directors ask you for a report on the effect that the advertising decisions have actually had on customers and sales in May 2021.
Provide TWO points that you would include in your report. Quote figures or calculations.
Explanation on customers✓ Figures✓ Explanation on sales ✓ Figures✓
Expected responses for 4 marks:

• Customers: The actual was 135 / 25 more (than the 110 expected) / 22,7% more / the business projected an increase of 20 customers / budget for 22,2% increase in customers, but actual increase (April to May) is 50%
• Sales: The actual sales were less than budget by R80 000 (from R770 000) to R690 000 by 10,4%.

Explain how the decline in the national economy has affected the average amount that customers spent in May 2021. Quote figures.
ONE explanation ✓ with figures ✓✓
Expected response for three marks:

• The average sales were budgeted at R7 000 per customer but this actually dropped to R5 111 per customer (690 000 /135)
• It appears that the increase in advertising has attracted many new customers (25) who do not have the same spending power as the company's traditional customers / sales per customer decreased (they spend R5 111 instead of R7 000 each)
• More customers are repairing dresses rather than buying new ones. Fee income exceeded budget by R6 000 (R21 000 – R15 000) / 40%. Sales of new dresses were R80 000 less than the budget (10,4%).

Expected responses for one mark:
Customers might be window-shopping / spending less / more buying on credit
Comment on whether the consumable stores have been well controlled or not. Quote figures or calculations.
Response for two marks: Comment which shows that consumable stores used were well controlled and are compared to fee income, with any valid figures provided.
Response for one mark: Comment which shows that consumable stores were overspent without being compared to fee income, with any valid figures provided.
Response for no mark: Comment which shows that consumable stores were overspent without being compared to fee income, with no figures provided.

Expected response for full marks: Mark comment & figures independently

• Consumable stores were budgeted at 28% (R4 200 ÷ R15 000) of fee income, while actual amount spent was 26% of actual fee income (R5 520 ÷ R21 000).
• Consumable stores exceeded the budget by 31,4% / by R1 320 (R5 520 – R4 200) while fee income exceeded the budget by 40% / by R6 000 (R21 000 – R15 000)

3.4 Calculate the reduction in the area rented (in square metres).
Reduction in rent = R39 960 – R31 968 = R7 992
R39 960 /120 m² = R333 Reduction in area = R7 992÷ R333 
two marks two marks
OR: 120 – (R31 968 ÷ 333) OR: 120 x 20%
96 two marks 7 992 / 39 960 answer expressed as m² Sign not needed
Answer:
24 m²  one part correct
If final answer is
R333 or 96m²
only 2 marks
(4)
TOTAL MARKS: 40

QUESTION 4
4.1
4.1.1 Weighted average accept recognisable abbreviations
4.1.2 FIFO 
4.1.3 Specific identification 
4.1.4 Perpetual system 
don’t accept PS
4.2 LOTUS ACCESSORIES
4.2.1 Calculate: Value of closing stock for gas lamps (using FIFO)
(220 – 40) (270 – 180)
(180 x R80) + (90 x R75) R14 400 three marks If adds up to 270 R 6 750 two marks
Answer:
R21 150* *one part correct Must be 2 batches

Calculate: Stockholding period in days of gas lamps (using closing stock) *one part correct; 365 is not regarded as ‘one part correct’
Using totals: 21 150 see above x 365 12 650 + 193 500 – 3 200 – 21 150 see above
181 800 (40 x 80)
OR:
Using units:
  270    x 365
2 180   
OR:
                 270                 x 365
(230 + 2 750 – 40 – 270)
or 2 940 – 270
2 670
OR:
                   270              x 365
(230 + 2 770 – 40 – 270)
or 2 960 – 270
2 690 Answer must be reflected in days, but ‘days’ does not have to be specified
Answer:
42,5 days  Must be x by 365 one part correct
Accept 42 or 43 days
OR
45,2 days
Accept 45 days
OR
36,9 days
Accept 37 days
OR
36,6 days
Accept 37 days

4.2.2 Alex suspects that the stock of gas lamps are not well controlled. Calculate the number of gas lamps missing.
One mark in total
230 + 2 750 – 40
2 940 – 2 180 – 270
One mark in total
230 + 2 770 – 40
2 960 – 2 180 – 270
Answer:
490
one part correct
OR 510
4.2.3 What should Alex say to his brother when dealing with this matter? Provide TWO points. Give TWO valid points ✓✓  ✓✓ part marks for incomplete, unclear or partial answers

• His actions are unethical / illegal / theft / compromises business profitability
• Tell him he can face dismissal / disciplinary action
• He must reimburse Alex for the loss
• It is a conflict of interest / he is taking advantage of being a family member / enriching himself at the expense of the business and he must stop this practice
• He should not be expected to be treated differently and he will be subject to the rules and procedures of the business
• All stock movements must be recorded / declared in advance
• Output VAT not paid over to SARS (which is a criminal offence)

4.2.4 Calculate the closing stock value for gas stoves on 30 April 2021 (using the specific identification method).
59 400 + 13 860 42 000 + 32 200
280 – 132 160 – 54
(148 x R495) + (106 x R700)
73 260 two marks 74 200 two marks
Answer:
R147 460 one part correct Must be 2 models
4.2.5 Alex thinks he should stop selling gas stoves as they are causing a liquidity problem and the profit is low. Provide figures to support his opinion.
Any valid opinion ✓ Figure ✓
Possible responses: Be alert to candidates who focus on one model only (different figures)

• Too much cash tied up in stock, R147 460 see 4.2.4
• Total profit on gas stoves is low R54 060 (R38 940 + R15 120)
• Low turnover rate / only 186 units sold, of 440 available / 42,3%.
• Too much stock on hand, 254 units.

Explain TWO points to convince him NOT to discontinue trading in gas stoves.
Any TWO valid points ✓✓  ✓✓ part marks for incomplete, unclear or partial answers

• He is achieving a 60% profit on B-Lite and a 40% profit on Smart.
• He could reduce the mark-up to increase sales (recognising the state of the economy and his customers).
• These stock items are durable and can be sold in the future.
• The trend is to move towards gas because of load shedding – demand will increase in the future.
• Customers may not be aware that he is selling these products / he must advertise more extensively
• A variety of stock will attract more customers
• Gas is cheaper than electricity

TOTAL MARKS: 35
TOTAL: 150