PROJECT QUESTION

PROGRAMME BACHELOR OF COMMERCE IN FINANCIAL MANAGEMENT

MODULE FINANCIAL MANAGEMENT 1A

TOTAL MARKS 60 MARKS

QUESTION 1 BUDGETS (25 MARKS)

Take the following information into account to prepare the Pro-forma Statement of Financial
Position of TIKO LIMITED as at 31 August 2019.

INFORMATION:

A. The percentage of sales method must be used for Inventories, Trade and other
Receivables, and Trade and other Payables.

NB: The sales for the year ended 31 August 2018 was R2 500 000.
The expected sales for the year ending 31August 2019 is R3 000 000.

B. A vehicle costing R300 000 is expected to be purchased during July 2019.

C. The total depreciation for the year ended 31 August 2019 on the relevant fixed assets is
expected to amount to R500 000.

D. An additional 172 000 shares will be issued at R10 per share during January 2019.

E. An interim dividend of R200 000 will be paid and a final dividend of R280 000 is expected to
be proposed during the year ending 31 August 2019.
F. R500 000 of the existing loan will be repaid during the year ending 31 August 2019

G. The expected Profit after Tax for the year ending 31 August 2019 is R972 000.

H. The Cash and Cash Equivalent must be determined (balancing figure).

I. Previous years statement of financial position.

 TIKO LIMITED.
Statement of Financial Position as at 31 August 2018.

ASSETS : R
Non-Current Assets 2 800 000
Fixed Assets 2 800 000
Financial Assets nil

Current Assets 2 878 000

Inventories 1 500 000
Trade and other Receivables 875 000
Cash and Cash Equivalents 503 000

5 678 000

EQUITY AND LIABILITIES :

Shareholders Equity 2 228 000
Ordinary Share Capital 1 700 000
Retained Earnings 528 000

Non-Current Liabilities 2 500 000

Mortgage loan: R. Bank 2 500 000

Current Liabilities 950 000

Trade and other Payables 950 000

5 678 000

QUESTION 2 WORKING CAPITAL MANAGEMENT (25 MARKS)

BARGAIN ZONE sells a variety of ladies wear. The following information for the month of June
2018 relates to their ladies frock, which they sell at R90 each.

INFORMATION:

2018 Inventory: No. of Cost

June Ladies frock units Per unit : R
01 Opening Inventory 500 43
09 Purchases 1 800 35
14 Purchases 900 40
16 Returns to supplier 500 40
25 Purchases 300 45

Total units sold during

30 2 625
the month.
REQUIRED :

2.1. Determine the number of units in their closing inventory

on 30 June 2018. (2 marks)

2.2. Calculate the value of their net purchases for June 2018. (5 marks)

2.3. Calculate the value of the closing inventory using the

First-in, First-out [ FIFO ] method. (3 marks)

2.4. Calculate the value of the closing inventory using the

Weighted Average Cost [ WACO ] method. (5 marks)

2.5. Determine the gross profit using each of the following methods.

2.5.1. FIFO. (6 marks)

2.5.2. WACO. (4 marks)

NB: present your answer using an extract from the Statement

of Comprehensive income.

QUESTION 3 COST- VOLUME- PROFIT RELATIONSHIP (10 MARKS)

LANCO ENGINEERING has provided the following budgeted information in respect of one of their
products for the year ending 28 February 2019.

INFORMATION:

1.
Projections R
Expected sales [ 45 000 units × R70 per unit ] 3 150 000
Total Variable Costs [45 000 units × R40 per unit ] 1 800 000
Total Fixed Costs 950 000
Expected net profit 400 000

The directors were not happy with the expected net profit.
The sales director suggested two options to improve the expected net profit:

Option A
 Launch an aggressive marketing campaign by injecting an additional R200 000 for
advertising.
 This will increase the sales volume by 20%.
 Sales commission will also increase by R8 per unit with, no change to the selling
price.

Option B
 Reduce the selling price by 10%.
 This will increase the sales volume by 20%.
 The fixed selling overheads will decrease by R200 000.
REQUIRED:

Determine the Total Marginal Income and the Net Profit / Loss of each of the options.