Accounting

Accountin" rel="nofollow">ing Attempt ALL questions. SECTION 1 — 60 marks Attempt BOTH questions 1. The followin" rel="nofollow">ing in" rel="nofollow">information relates to the accounts of Golf Direct, a golfin" rel="nofollow">ing supplies busin" rel="nofollow">iness owned by Paul Tay. Ledger balances as at 1 April Year 3 Equipment £1,200 Bank Overdraft £450 Sales Revenue (Sales) £920 Purchases £520 2 April J Young purchased goods on credit costin" rel="nofollow">ing £265·50 plus VAT. 5 April J Young returned damaged goods worth £49·50 plus VAT. 7 April Bought a new cash register on credit from Shop Supplies worth £405 plus VAT. 10 April J Young paid £275 on account by cheque. 14 April Received a letter from the accountant of J Young in" rel="nofollow">informin" rel="nofollow">ing that he has been declared bankrupt and can only pay 25p in" rel="nofollow">in the £. This amount was received by cheque with the letter and the remain" rel="nofollow">inder is to be written off. Note: VAT is to be applied at 20% where appropriate. (a) Usin" rel="nofollow">ing the in" rel="nofollow">information above, enter the transactions in" rel="nofollow">into the ledger accounts of Golf Direct on Page 2–4 of your Workbook (J Young’s openin" rel="nofollow">ing ledger balance has already been entered). Answer questions (b)-(d) on Page 5 of your Workbook. (b) Outlin" rel="nofollow">ine two roles of a Fin" rel="nofollow">inancial Accountant. (c) State a reason as to why busin" rel="nofollow">inesses may give each other: (i) Trade Discount. (ii) Cash Discount. (d) Describe how Rent Received would be dealt with in" rel="nofollow">in the Income Statement (Tradin" rel="nofollow">ing, Profit & Loss Account). 25 2 1 1 1 Page 03 MARKS 2. Use Pages 6–9 of the Workbook to answer this question. PART A Pam Daws owns a busin" rel="nofollow">iness that produces sandwich toasters for the caterin" rel="nofollow">ing in" rel="nofollow">industry. The followin" rel="nofollow">ing is the budgeted unit data for Year 3 of the busin" rel="nofollow">iness. Sellin" rel="nofollow">ing price £70 Raw materials £10 Labour (3 hours) £8 per hour Variable overheads £4 per labour hour Total budgeted fixed costs are £96,000 Total production is expected to be 14,000 units Usin" rel="nofollow">ing the above in" rel="nofollow">information, calculate: (a) Total variable cost per unit; (b) Contribution per unit; (c) Break-even poin" rel="nofollow">int in" rel="nofollow">in units and sales value; (d) Margin" rel="nofollow">in of safety (in" rel="nofollow">in units and sales value) at a production level of 7,000 units; (e) Profit/loss if all the expected production units are sold. PART B Piotr Czerniak manufactures safety helmets for Equestrian riders. He has provided the followin" rel="nofollow">ing data. Contribution per unit £40 Break-even poin" rel="nofollow">int 1,500 units (a) Calculate the total Fixed Costs. (b) Calculate how many units Piotr needs to sell to make a profit of £30,000. Piotr expects the followin" rel="nofollow">ing changes to take place in" rel="nofollow">in the comin" rel="nofollow">ing year: • Fixed costs to reduce by 5% • Sellin" rel="nofollow">ing price to in" rel="nofollow">increase by £4 • Variable cost per unit to reduce by £3·50 (c) Calculate the change in" rel="nofollow">in break-even poin" rel="nofollow">int based on the expected changes above. (d) (i) Outlin" rel="nofollow">ine two advantages of calculatin" rel="nofollow">ing accountin" rel="nofollow">ing ratios. (ii) Suggest three actions that could be taken when a negative closin" rel="nofollow">ing balance is identified in" rel="nofollow">in a Cash Budget. 3 2 3 3 3 2 3 6 2 3 [Turn over Page 04 MARKS SECTION 2 — 40 marks Attempt ALL questions 3. Ronald MacLean is the owner of Get Outdoors, a small wholesaler of accessories for retailers and outdoors enthusiasts. He sold the followin" rel="nofollow">ing goods to Hillfoot Cycles on 20 April Year 5: 9 Mountain" rel="nofollow">in Bike Helmets (various colours) @ £50·00 each 5 Trail X1 Mountain" rel="nofollow">in Bikes @ £270·00 each Ronald applies the followin" rel="nofollow">ing terms to all sales made to Hillfoot Cycles. Hillfoot Cycles has agreed in" rel="nofollow">in advance to make prompt payment in" rel="nofollow">in order to receive the cash discount. Hillfoot Cycles has requested that the in" rel="nofollow">invoice should reflect this. TERMS DELIVERY 10% Trade Discount Cash Discount — 7·5% one month VAT — 20% £30·00 on all orders of 15 items or less On the Worksheet provided on Page 10 of your Workbook, complete the Invoice that should be sent to Hillfoot Cycles. 10 Page 05 MARKS 4. Charlie McTavish is a sole trader. He provides you with the followin" rel="nofollow">ing in" rel="nofollow">information. The Cash and Cash Equivalents (Bank) balance of Charlie is expected to be £30,000 at 31 August Year 2. 1. Sales in" rel="nofollow">in units are estimated to be as follows: Aug Sept Oct 2,300 1,500 2,000 2. The sellin" rel="nofollow">ing price per unit will be £60 but Cash Sales will receive a discount of 10%. 3. Credit customers pay one month after sale. 4. Credit sales account for 60% of total sales each month. 5. Estimated production each month will be: Aug Sept Oct 2,500 1,100 1,500 6. Raw material costs are £16 per unit and are paid for one month after production. 7. Wages are £12 per unit and are paid in" rel="nofollow">in the same month as production. 8. Charlie buys a new van costin" rel="nofollow">ing £20,000 and pays a 20% deposit in" rel="nofollow">in September. On Page 11 of your Workbook, prepare Charlie’s Cash Budget for September. [Turn over 10 Page 06 MARKS 5. Harry Davidson purchases raw materials which are then manufactured in" rel="nofollow">into fin" rel="nofollow">inished products and sold to customers. The followin" rel="nofollow">ing in" rel="nofollow">information relates to the issue and purchase of materials for November. DATE PURCHASES/ISSUES 01 Nov Purchased 500 kg costin" rel="nofollow">ing £10·25 05 Nov Issued 200 kg to Job 10 07 Nov Purchased 750 kg costin" rel="nofollow">ing £10·30 12 Nov Issued 350 kg to Job 11 16 Nov Issued 440 kg to Job 12 Complete the Inventory (Stock) Record Card for the month of November, usin" rel="nofollow">ing Last-In-First-Out (LIFO) on the Worksheet provided on Page 12 of your Workbook. 10 Page 07 MARKS 6. In Year 1 Nicole Dance’s factory produced 2 products — 11,000 units of Product X and 10,000 units of Product Y, in" rel="nofollow">in lin" rel="nofollow">ine with consumer demand for the products. This required 74,000 labour hours. Annual Fixed Costs are £165,000. All units produced were sold. Data for each product is shown below. X Y Contribution per unit £20 £18 Labour Hours per unit 4 3 In Year 2, due to employee redundancies as a result of cost savin" rel="nofollow">ings, there will only be 56,000 labour hours available, although consumer demand will remain" rel="nofollow">in the same. Fixed costs will also remain" rel="nofollow">in the same as in" rel="nofollow">in Year 1. Use Page 13, (and the subsequent pages if needed), of the Workbook to answer the followin" rel="nofollow">ing questions. (a) For each product calculate the Contribution per Labour Hour. (b) Justify the order of production in" rel="nofollow">in order to maximise profit. (c) For Year 2, calculate how many labour hours should be allocated to each product in" rel="nofollow">in order to maximise profit. (d) For Year 2, calculate how many units of each product should be produced in" rel="nofollow">in order to maximise profit. (e) For Year 2, calculate the Contribution from each product and in" rel="nofollow">in total. (f) Calculate the maximum profit for Year 2.