1.1
1.1.1 Administration cost ✓ Accept recognisable abbreviations
1.1.2 Direct material cost ✓
1.1.3 Selling and distribution cost ✓
1.1.4 Factory overhead cost ✓ (4)
1.2.1 Calculate direct labour cost.
one part correct     one part correct   one part correct
384 000 ✓✓             31 500 ✓✓✓         44 160 ✓✓         ✓ one part correct; must be x 5
(1 920 x 5 x R40) + (90 x 5 x 70) + (384 000 x 11,5%) = R459 660
OR
           76 800             6 300                  8 832
5 x [(1 920 x R40) + (90 x 70)] + (76 800 x 11,5%)] = R459 660 (8)
Calculate direct material cost.
R106,00 four marks
715 500 two marks
131 500✓ + 584 000✓ x 5 500✓ = 583 000 ✓ One part correct
  1 350✓ + 5 400✓
     6 750       two marks(6)
OR

Total VC – DLC – S&DC
1 260 000 two marks        see 1.2.1; one method mark             two marks one method mark; one part correct
[4 200 x 300]                    – 459 660                                                – 217 340      = 583 000
OR

OS + P – (CS x R106) – (Theft x R106)
one mark        one mark          two marks       one mark             one method mark; one part correct
131 500         + 584 000          – 99 640           – 32 860                   = 583 000 (6)
1.2.2 Production Cost Statement for the year ended 29 February 2016:
No abbreviations accepted

*Must be correctly placed to get the mark for details; method mark for figure marked independently(8)
1.2.3 Calculate the break-even point for 2016.
570 000 two marks
343 340✓ + 226 660✓
     450 ✓ – 300 ✓
150 two marks
= 3 800 units✓ One part correct; cannot be negative; cannot be R or c (5)
Explain whether the owner should be concerned or not. Provide figures.
Yes / No is part of the explanation (No marks)
Comment comparing BEP to level of production ✓✓
Comparative figures ✓(Refer to answer above; must compare BEP to production)
Possible answers:

• The owner should not be concerned as the business produced (4 200 – 3 800) 400 units more than the break-even point.
• The owner should be concerned as the business produced (4 200 – 3 800) only 400 units more than the break-even point.
• Owner should be concerned because they make a profit on 400 units only. (3)

1.2.4 The owner is not satisfied with the internal control of the raw material (fabric).

(11)
TOTAL MARKS : 45

2.1.1 Simply Traders have the telephone numbers of all their debtors. What other information should they obtain before allowing customers to open accounts? State TWO points with a reason in EACH case.
Do not accept Telephone number of debtor
Can award two marks if information & reason is in same sentence

(4)
2.1.2 Calculate the correct closing balance of the Debtors' Control Account on 31 October 2016.
179 500✓ + 2 500✓  –     900✓✓     + 500✓ = 181 600✓       One part correct
                                 21 000 – 20 100                 Signs cannot be reversed as this is Dr / Cr
OR: T-account with figures on correct sides

(6)
Calculate the correct amounts owing by debtors.

*One part correct for method mark
(12)
2.1.3 Calculate the percentage of debtors complying with the credit terms.
58 600 two marks 
35 300✓ + 23 300✓
        201200✓
=29.1% accept 29%

OR

ignore 142 600 – not applicable to compliance
142 600 = 70,9% one mark
201 200  one mark
Complying = 29,1%
 one method & one accuracy mark

OR 17,5% one mark + 11,6% one mark = 29,1% one method & one accuracy mark (4)
Explain TWO measures to improve the collection from debtors.
Any TWO relevant measures ✓✓✓✓ Part-marks for unclear / incomplete answers
Possible responses for two marks: Accept alternative valid responses

• Monthly statements must be sent out / emailed on time.
• Offer higher discounts for early payments.
• Add interest on overdue accounts.
• Do not sell to debtors exceeding the credit limit / not up to date with payments.
• Send SMS reminders to debtors.
• Employ services of an attorney or debt collector / sue the debtor.
• Encourage debtors to pay by debit order.

Possible responses for one mark: Interest / discount / SMS
No mark for: Get debtors over 60 days to pay quicker or reduce credit limit of such debtors (4)
2.2 Calculate the amount receivable from or payable to SARS for VAT on 31 August 2016.
Mark one line only. Cannot mix signs. Inspect candidates’ responses. Award highest mark.
     ✓          ✓           ✓          ✓        ✓✓        ✓✓       ✓          One part correct
14 250 – 27 720 + 2 940 – 1 120 – 1 330 + 40 880 = 27 900
40 880 – 1 120 = 39 760 three marks

OR
– 14 250 + 27 720 – 2 940 + 1 120 + 1 330 – 40 880 = – 27 900
                                                     1 120 – 40 880 = –39 760 three marks
OR
Balance at beginning                = 14 250
Output 40 880 – 1 120 – 1 330 = 38 430
Input 27 720 – 2 940                = (24 780)
                                                     27 900
OR

Receivable/Payable: Payable ✓ Do not accept Receivable (irrespective of workings)
TOTAL MARKS : 40

QUESTION 3
3.1
3.1.1 Expense ✓ Accept recognisable abbreviations
3.1.2 Current asset ✓
3.1.3 Current liabilities ✓
3.1.4 Net working capital ✓ (4)
3.2 AUDIT REPORT
3.2.1 To whom is the audit report addressed?
Shareholders✓ (1)
3.2.2 Who has to ensure that the financial statements are prepared and presented at the annual general meeting? (1)
Directors / Management / CEO / CFO ✓
3.2.3 Fralezi Ltd received a/an (qualified/unqualified/disclaimer of opinion) audit report.
                                               Mark the two parts independently.
Unqualified ✓
Explain your choice. Any valid response ✓
Fair presentation / Clean audit / Did not state any shortcomings in the financial statements / In accordance with IFRS or Companies Act. (2)
3.2.4 Explain why the independent auditors referred to page numbers 11–29 in the report.
Any valid explanation ✓✓                       Part-marks for unclear / incomplete answers

• Auditors are responsible for only parts / certain pages of the annual report.
• They are not accountable for the other information in the annual reports.
• Financial statements on pages 11–29 were subjected to audit / examination.
• Additional information, such as corporate social investment matters, is not audited.

Do not accept statistical sampling as a reason.(2)
3.3 FRALEZI LTD INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2016

Foreign items –1 (max –2) ** Award marks to workings if item misplaced; -1 for placement; max -2 (60)
TOTAL MARKS : 70

4.1
4.1.1 C ✓ Solvency
4.1.2 D ✓ Liquidity
4.1.3 B ✓ Return on equity
4.1.4 A ✓ Gearing (4)
4.2.1 ORDINARY SHARE CAPITAL:
AUTHORISED SHARE CAPITAL
1 500 000 ordinary shares
ISSUED SHARE CAPITAL Presentation, incorrect or no details -1 (max -1)

RETAINED INCOME: Presentation, incorrect or no details -1 (max -2)

(9)
4.2.2 Calculate the change in loan for the Cash Flow Statement.
8 000 000 – 4 500 000 = 3 500 000 ✓✓ No part marks (2)
Calculate the income tax paid for the Cash Flow Statement.
23 400 ✓ + 190 500 ✓ – 6 200 ✓ = 207 700 ✓ One part correct
OR
– 23 400 – 190 500 + 6 200 = –207 700
OR T-account with figures on correct sides

(4)
4.2.3

(4)
4.2.4 Calculate the acid-test ratio on 30 June 2016.
1 015 000 one mark – 564 000 one mark
451 000 two marks
(246 000 ✓ + 205 000 ✓) : 635 200 ✓ = 0,7 : 1 ✓One part correct; must be y:1 (4)
Calculate the debt-equity ratio on 30 June 2016.
8 000 000 ✓ : 10 050 750 ✓ = 0,8 : 1 ✓One part correct; must be y:1 Accept 0,79 : 1 (3)
Calculate the % return on average shareholders' equity (ROSHE) for the year ended 30 June 2016.
         4  44 500 ✓                          x   100                   
½ ✓ (10 050 750✓ + 9 540 000✓)       1 
9 795 375 (3 marks)
= 4,5% ✓One part correct; cannot be Rands, cents, units etc (5)
Calculate the net asset value per share (NAV) on 30 June 2016.
10 050 750 ✓ x 100 = 1 058 cents ✓One part correct OR R10,58 OR 1057,9 cents
 950 000 ✓         See 4.2.1                 Must be Rands or cents (3)
4.2.5 The liquidity of the company has improved. Quote THREE financial indicators to support this statement. Provide figures and trends.
THREE valid indicators ✓✓✓ Figures and trends ✓✓✓
Current ratio – 0,3 : 1 to 1,6 : 1
Acid-test ratio – 0,1 : 1 to 0,7 : 1 see 4.2.4
Debtors' collection period – 43 days to 36 days
Do not accept creditors' payment period and stock turnover rate
If more than three indicators shown, -1 for superfluous / foreign indicator; max -2(6)
4.2.6 Provide calculations to show the change in the dividend pay-out policy.
Comparison of DPS to EPS for 2015 ✓ Calculation / implied calculation ✓
Comparison of DPS to EPS for 2016 ✓ Calculation / implied calculation ✓
Possible calculations for two marks each:

• 2015: 35/58 = 60,3% OR 0,6:1 OR Paid out most of earnings/more than 50%
• 2016: 55/51 = 107,8% OR 1,1:1 OR Paid out more than earnings

Possible responses for one mark each:

• 2015: Paid out 35c of 58c earnings / retained 23c of 58c earnings
• 2016: Paid out 55c of 51c earnings / paid out 4c from previous earnings (4)

Explain why the directors decided to change the policy. State ONE point with figures.
Any ONE valid explanation ✓ Relevant figures ✓
Responses for two marks:
To satisfy shareholders for:

• ROSHE decreased (from 6,2%) to 4,5%. see 4.2.4
• Market price decreased (from 1 030 cents) to 1 000 cents.
• EPS decreased (from 58 cents) to 51 cents.

Do not accept NAV going down; this is a result of the decision.
Responses for one mark:

• Satisfy shareholders / Encourage new shareholders
• To get directors re-elected at AGM (2)

4.2.7

1. Calculate Mary's % shareholding on 1 October 2015 after repurchase of shares.
   Do not award this mark if another figure added 420 000✓ x 100 = 50,9% ✓One part correct Accept 51%
   (900 000✓ – 75 000✓) Must be below 100%; % sign not essential
   825 000 two marks (4)
2. Explain how Mary has benefitted from the decision to repurchase the shares.
   Explanation ✓✓ Part-mark for unclear / incomplete answer
   Mary became the majority shareholder (2)
3. The independent auditor discovered that Mary had made the decision to repurchase the shares without informing the board of directors. Why should the independent auditor be concerned about this?
   Responses for two marks: ✓✓ Part-mark for unclear / incomplete answer
   
   • Not good corporate governance / Not in accordance with King Code
   • CEO cannot make these decisions without getting board approval
   • Considered to be insider trading / Abuse of position for personal benefit
   • Unethical / Not transparent

Responses for one mark:
Not good / not right / King Code / Corporate governance / Could have outvoted other shareholders or directors(2)
4.2.8 The Cash Flow Statement reflected fixed assets purchased to the amount of R4,5 million.
Mark source first. If this correct, decision must match source. Explanation must be relevant to the source.

(10)
TOTAL MARKS : 75

5.1 INVENTORY VALUATION
5.1.1 Explain the FIFO valuation method.
Any valid explanation, e.g. Part-marks for incomplete explanation
It is assumed that the first items bought are the first items sold. ✓✓
OR
Stock on hand is valued at the latest cost prices.
Explain the specific identification valuation method.
Any valid explanation, e.g. Part-marks for incomplete explanation
Each item of stock is valued at its original cost to the business. ✓✓ (4)
5.1.2 Calculate the cost price per laptop on hand on 1 October 2015.
R413 000/118 = R3 500 ✓✓ No part marks (2)
5.1.3 Calculate the value of the closing stock on 30 September 2016.
PREFERRED METHOD
202 500 three marks 502 200 four marks
       ✓           ✓  ✓               ✓        ✓       ✓       ✓              ✓✓ One part correct
[3 750 x (410 – 356)] + [4 650 x (630 – 20 – 502)] = R704 700
54 two marks                              108 three marks
                                                    610 two marks
                                                    128 two marks
ALTERNATIVE METHOD WITH TOTALS
one mark     two marks         one mark  one mark  two marks      one mark & one method mark
(1 537 500 – 1 335 000) + (2 929 500 – 93 000 – 2 334 300) = 704 700
          202 500                                            502 200
three marks                                                four marks
ALTERNATIVE METHOD USING COST OF SALES
Candidates must know that opening stock has all been sold to get 3 marks on net purchases:
Net purchases                  – Cost of Sales                        = Closing stock
                           1 335 000 two marks 2 334 300 two marks
+ 4 374 000       – [(356 x R3 750) + (502 x R4 650)]            = R704 700
one or three marks one mark one mark one mark one mark one mark & one method mark
-403 000 & +403 000 = 0 (9)
5.2 MANAGEMENT OF INVENTORIES
5.2.1 What decision did Kyle take regarding the selling price of the desks? Provide figures.
 Decision ✓ Figures ✓

• He increased the mark-up from 60% to 80%.
• He increased the selling price from R1 920 to R2 520 / by R600 / by 31%. (2)

How has this decision affected the business? State TWO points. Provide figures.
Any two valid points ✓✓ Figure ✓✓

• Gross profit increased from R259 200 to R336 000 / by R76 800 / by 29,6%.
• Stock turnover rate decreased from 7,2 to 6,0 times.
• Orders of desks decreased to 300 units / by 70 units / by 19%.
• Sales of desks decreased to 300 units / by 65 units / by 18%. (4)

5.2.2 Was it a good idea for Kyle to change to a cheaper supplier of chairs?
YES/NO: No✓
Explain TWO points. Provide figures.
Any two valid points ✓✓ Figure ✓✓

• The gross profit decreased from R148 920 to R95 200 / by R53 720 / by 36%.
• The returns increased from 0 to 90 units / the customers are not satisfied with the quality of the product / Resulted in lower net sales 680 compared to 730.
• The cheaper price of R490 did not affect the stock turnover rate which remained constant at 4,0 / chairs did not appear to be popular with customers.(5)

5.2.3 Based on the information given, provide TWO separate suggestions to Kyle to improve the profit on printers in 2017.
One valid point for pricing ✓ Figure ✓ One valid point for orders ✓ Figure ✓
Suggestion 1 (with figures):

• Kyle should increase the price; Any figure between R975 and R1 200 OR
• Kyle should increase MU%; Figures: Any % between 25% and 70%.

Suggestion 2 (with figures):

• Kyle must plan purchase of printers / must follow up on orders to meet the demand of 925 units (i.e. 200 more than current sales) OR
• Kyle must maintain / improve stock turnover rate of 11,8 times

Responses for one mark only:
Find a cheaper supplier / Request deposits from customers / Payment in advance / Follow up on orders from customers / Negotiate a trade discount on purchases.(4)
TOTAL MARKS:30

QUESTION 6
6.1.1 TWO items recorded incorrectly in the Cash Budget:
Any TWO of: ✓✓
If more than two items given, -1 for invalid item; max -1
Discount received Depreciation Bad debts (2)
6.1.2 TWO items in the Cash Budget that would NOT appear in a Projected Income Statement:
Any TWO of: ✓✓
If more than two items given, -1 for invalid item; max -1
Cash from debtors Fixed deposit matures
Payments to creditors Repayment of loan(2)
6.2 DEBTORS' COLLECTION SCHEDULE

6.3 AMOUNTS FOR THE CASH BUDGET

(18)

6.4.1 The directors changed the method of payment to the salespersons.
Explain how this has benefitted the salespersons. Quote figures.
Explanation ✓ Figures ✓
Although the salaries were reduced from R40 000 to R12 000, they received a commission of R66 150 (total: R78 150) / 95,4% or R38 150 more than their previous salaries.
Explain how this has benefitted the business. Quote figures.
Explanation ✓ Figures ✓
Actual sales are higher than the budgeted sales by R201 600 (489 600 – 288 000); sales are 70% higher than budget.(4)
6.4.2 The directors are not concerned about the overspending on packing material. Explain why this is so. Quote figures or calculations.
Explanation ✓ Both items i.e. Sales & Packing materials must be mentioned
Figures ✓✓✓✓
Candidates must quote percentages – if totals are quoted, award only one mark for each item
Candidates must compare percentages of these two items to earn full marks
Sales were 70% over budget, while packing materials were only 20% over budget.
OR
Packing materials were budgeted at 5% of sales, while actual packing materials were only 3,5% of sales.
Response for one mark:
Packing materials will increase if sales increase.(5)
TOTAL MARKS:40