2022 EMAC2624 Test 2 FINAL

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UNIVERSITY OF THE FREE STATE
SCHOOL FOR ACCOUNTANCY
EMAC2624
TEST 2: 26 September 2022
Marks: 60 Minutes:: 90
This test comprises of FOUR questions, set on FIVE numbered pages.
INSTRUCTIONS
1. Answer all questions.

2. No pencil or erasable pen may be used.
3. Calculators may be used.
4. Show all calculations clearly with cross references.
5. Read the “REQUIRED:” properly before answering the question.
6. Start every new question on a new page of your answer sheet.
7. Marks will be deducted if the instructions aren’t followed.
Disclaimer: All names of persons, places and business entities mentioned in this paper are
fictitious and any resemblance to real persons, living or dead, places and business entities
are purely coincidental.
Page 1 of 5
Question 1 (9 marks; 13,5 minutes)
Management accounting focuses on providing relevant information to managers, the

key personnel within an organisation who plan, organise, direct and control operations.
Management accounting provides essential information in a variety of reports, which
managers analyse and interpret in order to make informed decisions. Ethical
standards provide sound, practical advice for management accountants and
managers.
REQUIRED: Marks
(a) List the eight characteristics of good information. 4

(b) List the five fundamental principles of the CIMA’s Code of Ethics 5
and briefly explain each principle.
Total for Question 1 9
Question 2 (16 marks; 24 minutes)
Travel Point (“TP”) is a travel agency specialising in organising flights between

Bloemfontein and Cape Town. It books passengers on Best Airways (“BA”), who
charges passengers R2 800 per round-trip ticket.
TP receives a commission of 15% of the ticket price paid by the passengers, while the
rest of the ticket price accrues to the airline (BA). TP’s total monthly costs amount to
R44 800 at the minimum sales level of 230 tickets and R47 300 at the maximum sales
level of 270 tickets, within the same relevant range.
REQUIRED: Marks
(a) Calculate the contribution margin per ticket for Travel Point. 6
(b) How many tickets must Travel Point sell to earn a profit of R15 000 3
per month?
(c) Calculate the margin of safety in units and margin of safety ratio (%) 3
if Travel Point sells 280 tickets and explain what this figure means.
(d) List four assumptions of the cost-volume-profit analysis (CVP) 4
Show all calculations clearly. Round all calculations and your final
answer to 2 decimals, i.e. 4,138329 rounded to 4,14.
Page 2 of 5
Question 3 (17 marks; 25,5 minutes)
LenQ Limited values inventory applying the principle of First-In-First-Out (FIFO).
Manufacturing overheads are allocated to products at a rate of 60% of direct material

cost. All variable manufacturing costs increased with 3% on the 1 st of August 2022.
All fixed costs remained constant between the months of July and August. All sales
prices and other costs remained constant between July and August.
LenQ Limited has provided you with the following actual information for August 2022:
Units produced 5 800
Units sold 4 900
Units in closing inventory 2 000
Direct material cost per unit R18.00
Direct labour cost per unit R24.50
Variable manufacturing overheads per unit R8.20
Total fixed manufacturing overheads R123 000.00
Total fixed marketing cost R220 000.00
Total sales revenue R910 000.00
Commission paid 5%
REQUIRED Marks
(a) Calculate the variable manufacturing unit cost as well as the

absorption cost per unit for August 2022. 4
(b) Compile a contribution income statement for August 2022. 10
(c) Calculate how the profit in (b) above will differ if it is calculated
using the absorption costing method. 3
Page 3 of 5
Question 4 (18 marks; 27 minutes)
The directors of ABC Ltd. Are very concerned with the negative cash balance that has
become a regular occurrence in the company. They commissioned you, an expert in
cash budgets, to compile a cash budget for the coming months. The management
accountant has prepared sales budgets for the first semester of 2022. These are
presented below:
Month Total Sales (R)

January 250 000
February 300 000
March 230 000
April 200 000
May 225 000
June 400 000
July 420 000
Cash sales amount to 30% of the total sales. Collections of the credit sales are as
follows:
• 40% in the month of sale and is subject to a 5% discount.
• 30% one month after the month of sale
• 28% two months after the month of sale and
• 2% is uncollectible.
Similar statistics for material purchase payments:

• Payments are in cash for 20% of purchases
• All credit payments are made one month after the purchase
• Material purchases amounted to R64 000 for April and R69 700 for May.
Other expected expenses for May 2022 include the following:

Selling and marketing costs R17 000
Depreciation R15 000
Selling and marketing costs are paid in cash in the month it is incurred.
The closing balance of bank as on 30 April 2022 amounted to an overdraft of

R120 000.
Page 4 of 5
REQUIRED Marks
(a) Prepare a cash budget for ABC Ltd. for May 2022. Show all your
calculations. 12
(b) Provide 4 benefits of using computers to prepare budgets. 4
(c) Name 4 reasons for preparing budgets. 2
END OF QUESTION PAPER

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Page 5 of 5

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`

UNIVERSITY OF THE FREE STATE

SCHOOL FOR ACCOUNTANCY

TEST 2: 26 September 2022

This test comprises of FOUR questions, set on FIVE numbered pages.

1. Answer all questions.

Management accounting focuses on providing relevant information to managers, the

(a) List the eight characteristics of good information. 4

Total for Question 1 9

Question 2 (16 marks; 24 minutes)

Travel Point (“TP”) is a travel agency specialising in organising flights between

LenQ Limited values inventory applying the principle of First-In-First-Out (FIFO).

Manufacturing overheads are allocated to products at a rate of 60% of direct material

(a) Calculate the variable manufacturing unit cost as well as the

(b) Compile a contribution income statement for August 2022. 10

Total for Question 3 17

Month Total Sales (R)

Similar statistics for material purchase payments:

Other expected expenses for May 2022 include the following:

The closing balance of bank as on 30 April 2022 amounted to an overdraft of

(b) Provide 4 benefits of using computers to prepare budgets. 4

(c) Name 4 reasons for preparing budgets. 2

Total for Question 4 18

END OF QUESTION PAPER

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