Test 2 Mark Plan For Students June 2022

11/05/2024, 16:58 Test 2 Mark plan for students June 2022
MAC3761/Mark plan for students/T02-2022
MAC3761 Test 02-2022

Mark plan for students
Management Accounting III
Year module
Department of Management Accounting
IMPORTANT INFORMATION
This tutorial letter contains the mark plan for Test 2.
Open Rubric
about:blank 1/15
about:blank 2/15
Dear Students
Please use the mark plan in this document to compare with your submission for Test 2.
Take note that in this suggested solution,  indicates 1 mark.

If “r/w” is indicated after a mark, the amount is either right or wrong – no principle mark is
awarded here.
If “(c)” or “P” is indicated after a mark, it is a “carry-through” or a “principle” mark i.e. the mark
is awarded for correctly carrying an amount over from a previous calculation and/or correctly
applying the tested principle(s) even though the amount might be incorrect. We also use the
“P” mark for awarding marks for layout and/or presentation of an answer.
Kind regards,
MAC3761 lecturers
For an effective and efficient turnaround on queries, refer to the MAC3761 site on myUnisa for
the relevant lecturers’ contact details.
E-mail: MAC3761-22-Y1@unisa.ac.za or MAC3761@unisa.ac.za
[TURN OVER]
about:blank 3/15
QUESTION 1 SKD LIMITED
A) CALCULATE THE WEIGHTED AVERAGE COST OF CAPITAL

[AVAILABLE - 18 MARKS]
[MAXIMUM - 15 MARKS]
INSTRUMENT MARKET VALUE COST OF E QUITY

Ordinary shares
MVe (“Price”) = R484m 끫歼끫 殤 =D1/P0 +g
Workings: D1 = 100c x 1,055 = 105,5c  r/w
20 000 000 shares x R24,20  r/w P0 = 2 000c x 1,1 x 1,1

=R484m  (c)
=R24,20
(R20 x 1,1 x 1,1)
=105,5c/2 420c + 5,5 r/w
Market capitalisation given as R300m in
=4,36 + 5,5
2015, share price 1500c therefore number
of ordinary shares issued: =9,86%
R300m/R15 = 20m  r/w 1 mark for correct
Share price end 2020: formula regardless of
2 000c/R20 given
5 what you have for D1
and P0 but had to add
the growth of 5,5.
INSTRUMENT MARKET VALUE COST OF PREF.

Preference shares
CF0 0
CF 1 (2023) - R137,5m (250m x R5 x 11%)  r/w
CF 2 (2024) - R137,5m 끫歼끫 殺 = 8,75%+3,5%
끫歼끫 殺 = 12,25%
CF 3 (2025) - R1 387,5 m
 r/w (R1250m + R137,5m)  r/w  r/w
I/Y 12,25
Comp NPV R1 212,632 023)
4
ALTERNATIVE (Preference shares)
INSTRUMENT MARKET VALUE C OST OF P REF.

Preference shares
FV - R1 250 m  r/w
끫歼끫 殺 = 8,75%+3,5%
PMT - R137,5m (250m x R5 x 11%)  r/w
N 3 r/w
끫歼끫 殺 = 12,25%
I/Y 12,25
Comp NPV R1 212,632 023  r/w
about:blank 4/15
INSTRUMENT MARKET VALUE COST OF LOAN

Term loan 끫殀끫끫殢1殀=Interest
끫歼끫殢 1
끫歼끫殢1 = 13,1% x 0,72
끫歖/w 끫歼끫殢1 = 9,43%
 r/w
끫殀끫끫殢1殀*= R11 059 200(R120 million x 12,80% x 0,72)
0,0943  끫欄
= R117m (R117 276 776)
*If you consistently used a before tax interest rate

above the line ie.12,8% and below the line use
3
13,1%, your answer will be the same but 1 mark
would have been deducted for applying the incorrect
presentation/incorrect principle.
INSTRUMENT MARKET V ALUE COST OF DEBENTURES

Debentures
MVd2 = R628m FV - R1 978m =
(2 098m  r/w – 120m  r/w])
PV R628m (given)
n 2 r/w
PMT - R18m (R25m x 0,72)  r/w
Comp I/YR 79,72% (post-tax)
4
Capital structure Market value of Portion of Cost of Weighted
instruments capital capital cost of
(Rm) structure capital
Ordinary shares R484 0,198 9,86% 1,95%
Preference shares R1 213 0,496 12,25% 6,08%
Term loans R117 0,047 9,43% 0,44%
Debentures R628 0,257 79,72% 20,49%
Total R2 442 1 / 100% 28,96% P
(P) mark for reflecting the

ALTERNATIVE CALCULATION OF WACC: final WACC figure as a
percentage regardless of
the number
끫殀끫殀끫殤歼歼 끫殀끫殀끫殺歼歼 끫殀끫殀끫殢1 歼歼 끫殀끫殀끫殢2

끫殀끫殀끫殤+끫殀끫殀끫殺+끫殀끫殀끫殢 끫殀끫끫殀殤끫+殀끫끫殀殢끫2殀x끫끫殺+끫끫殀끫殀+끫殢
殀1+ 끫殀끫끫殀殤끫+殀끫끫殀殢끫2殀x끫끫殺+끫끫殀끫殀+끫끫殢殀1+끫끫殀殀끫끫殤殀+끫끫殢殀2끫x殀끫끫殺+끫끫殀끫1殀+끫殢1+끫殀끫殀끫殢2 x 끫
殀1+ 歼끫歼2
OR:
( 끫殀끫殀끫殤 x 끫歼끫殤)+ (끫殀끫殀끫殺 x 끫歼끫殺) + (끫殀끫殀끫殢1 x 끫歼끫殢1) + (끫殀끫殀끫殢2 x 끫歼끫殢2)

끫殀끫殀끫殤+끫殀끫殀끫殺+끫殀끫殀끫殢1+끫殀끫殀끫殢2
484 1 213 117 628
WACC = 2 442
x 9,86% + 2 442
x 12,25% + 2 442
x 9,43% + x 79,72%
2 442
about:blank 5/15
WACC = 28,96%  P
Conclusion:
The target WACC of SKD Limited is provided as 11,5% and therefore, the company does not
meet the target WACC as their current WACC is too high at 28,96%.  P
Available marks: [18]

Maximum marks: [15]
(P) mark for concluding whether the company meets the

target WACC or not with regards to your workings. Please
note that if your workings show that it is less than the target
WACC, you cannot simply say that it is not met, this is a
generic response without substantiating why.
about:blank 6/15
QUESTION 1 SKD LIMITED (continued)
B) EVALUATION OF THE GROUP’S DIVIDEND POLICY

[AVAILABLE: 9 MARKS CALCULATION SECTION]
[MAXIMUM: 6 MARKS CALCULATION SECTION]
1. PREFERENCE SHARES (NOTE: THIS DISCUSSION IS MARKED AS PART OF THE CALCULATION SECTION)
SKD has redeemable preference shares in issue. In substance, redeemable preference shares are debt
instruments as opposed to equity instruments. Therefore, the “dividends” payable in relation to
redeemable preference shares are in fact interest expense as opposed to preference claim to the
distributable earnings of the group (Skae 2017:254). As such, SKD’s dividend policy will not encompass
these preference shares because it is classified as debt in substance.  r/w Awarded a mark for
mentioning the fact that preference shares is considered to be part of debt and that therefore preference
dividends are not part of the dividend policy.
2. ORDINARY DIVIDEND
Details R million
2020 2021 2022
Profit before interest & tax 892 907 919  r/w
all three
years
Net interest expense (120) (125) (139)  r/w
all three
years
Taxation (183) (185) (187)  r/w
all three
years
Net profit for the year 589 597 593
Ordinary dividends paid 18 19 r/w 20 r/w

r/w
Dividend pay-out ratio* 3,06% 3,18% 3,37% (c) all

three
years
Dividend cover* 32,72 31,42 29,65 (c) all
This must not be a % three
years
 Given
 Dividends paid ÷ Net profit for the year
 Net profit for the year ÷ Dividends paid
* Mark either Dividend pay-out ratio OR Dividend cover 9
 2020: 90 cents x 20 000 000 shares = R18 000 000
2021: 95 cents x 20 000 000 shares = R19 000 000
5
about:blank 7/15
2022: 100 cents x 20 000 000 shares = R20 000 000

ALTERNATIVE CALCULATION
2020 2021 2022

Profit before interest & 892 907 919  r/w all three
tax years
Net interest expense (120) (125) (139)  r/w all three
years
Taxation (183) (185) (187)  r/w all three
years
Net profit for the year 589 597 593
Dividend per share 90 cents 95 cents 100 cents
Earnings per share  29,45  r/w 29,85  r/w 29,65  r/w
Dividend payout ratio  3,06% 3,18% 3,37% (c) all three

years
Dividend cover* 32,72 31,42 29,65 (c) all three
years
 Given
 589/20 = 2945 cents
597/20 = 2985 cents
593/20 = 2965 cents
 90/2945
95/2985
100/2965
 2945 cents/90
2985 cents/95
2965 cents/200
Discussion points: (Maximum = Any 3 marks)

There was an increase in profits before tax between 2020 and 2022. This was provided in the AFS. 
 The dividends over the entire period (2020 – 2022) have increased each year in line with the
increase in profits. This was provided in the scenario. 
 The company cash reserves have also been following the same trend as profit after tax by
increasing year-on-year in line with the profit increase or decrease. This was provided in the
scenario. As such, it appears that the dividends are continuously paid from the profits after tax. 
 Information content or signalling effect – It is possible that SKD has created an expectation that
the dividend would be paid in line with the profits generated. This is a good policy because in years
where the company cannot sustain/meet the expectation, perhaps due to (significant) decline in
profits or losses made, shareholders will accept the fact. 
 Dividends are not paid in the same % ratio as earnings. 
 The current dividend policy follows the performance of the company which makes it sustainable. 
 The Group distributes a small percentage of its profits to shareholders, which allows it to invest
more into the growth projects, while managing shareholders’ expectations. The Group has averaged
a dividend pay-out ratio (dividend cover) of 3,34% (29,99) over the 3 years, and it should consider
establishing a fixed dividend policy (dividend as a fixed % of profits). (P) This would allow
about:blank 8/15
shareholders to manage their expectations better and to plan effectively. Comparison to industry
dividend pay-out will inform whether the company’s policy of paying dividends is generous.
(P) mark for concluding/interpreting

according to your workings of dividend cover
and dividend payout. Max 9 marks
in total ie. 6
(calculations)
+3
(discussion)
about:blank 9/15
C) PROPOSED CHANGES TO WORKING CAPITAL MANAGEMENT

AVAILABLE MARKS: 9
MAXIMUM MARKS: 6
Cash discount:
 The proposed cash discount
By giving customers a discount, this will encourage more sales.

of R48m (R9 545m x 25% x 2%) to lead to a decrease in profits.
Bad debts:
There will be a decrease in bad debts (due to the decline in credit sales/debtors or could be
due to an increase of the cash discount leading to less credit sales) and therefore will lead to
 The decrease in bad debts will be R13,6m (R68m x 20%).
an increase in profits.
Late payment interest:

There will be an increase in profit as a result of extra interest charged on accounts which are
 The effect of this will be an increase in profit of R33m ([R9 545m
at least 60 days outstanding.
x 75% x 70% x 8%]  x [(90 – 60) ÷365 r/w]).
Holding costs:
There will be a saving in holding costs which will increase profit. [(R955m+R953m) ÷ 2 –
R825m] x 11,5%: R15m).
Advice:  (P) Any one mark
 The proposed change to the working capital policy should be implemented as it will yield an
overall increase in profits (pre-tax) of R14 million.
 The company should also consider what the financial impact of this policy would be in the future,
as there may possibly be changes in the economy or changes in consumer spending which
might cause losses/decreases going forward.
Workings:  (For presentation)
Item Rm
Cash discount (R9 545m x 25% x 2% ) (48)
Decrease in bad debt expenses (R68m x 20%) 14
Late payment interest 33

(R9 545m x 75% x 70% x 8% x [(90– 60) ÷365])
Holding costs saved (R954m – R825m) x 11,5% 15
Pre-tax net benefit/(cost) on change of policy R14m
about:blank 10/15
Any five risk indicators with its corresponding mitigation.

One mark for the risk 
One mark for the corresponding mitigation 
You had to explain the risk (why is it a risk?/what is the risk?), not only list/identify.
If the risk is not valid, the mitigation will not be marked.
D) RISK ASSESSMENT
Risk identification and discussion Risk mitigation

Competition:
The markets for skin and hair products are The company should strengthen its long-term
highly competitive and some of the relationships with its existing customers by
competitors may have advantages that providing terms that will be favourable to the
adversely affect the SKD’s ability to customers. The company should also
compete favourably.  consider introducing added services e.g.
including loyalty points, delivery, etc. 
Infrastructure (power):
The manufacturing operations rely on The company should increase its usage of
electricity supply (“energy-intensive”) and renewable energy and alternative energy
the supply can be interrupted. In the main, sources to minimise disruption to operations.
the manufacturing facilities will largely be 
impacted by the current loadshedding) 
Highly skilled workers:
In the main, predominately high-level The company should aim to boost staff morale
technical skills needed in the operations and provide employees with a conducive
due to the chemicals they work with. SA has environment for employees to thrive. The
short supply of highly technical labour company should invest in the upskilling of its
force.  employees, as well as graduates and bursary
holders who can always be brought into the
employ of the organisation. Continuous
review of the groups’ recruitment,
remuneration and skills retention strategies to
always remain competitive amongst its peers
and competitors. Provision of continuous
upskilling programmes and on-the-job training
opportunities for the current labour force. 
Global economic uncertainty:
Recession and challenges in different The company should consider diversifying its
global markets, slow economic growth may clientele further, especially targeting markets
lead to a decline in demand and prices.  not yet penetrated. It should consider entering
about:blank 11/15
in long-term contracts with its customers. 

Possible lawsuits Be transparent on the packaging of the
The products could cause allergic reactions product and communicate with consumers
or negative side effects and this might lead regarding possible side effects. Warning on
to potential law suits/reputational damage.
 the labels. 
Reputational damage List ingredients on the product and
Should a consumer use the product and an communicate to consumers what number
allergic reaction/adverse side effect they can contact should they experience
occurs. problems. Be transparent. 
Changes in consumer preferences:
Trends in the health and beauty industry is The company should appoint someone that
ever changing. SKD must keep up with what keeps a close eye on the research with
its customers want across all races and regards to consumer behaviour and trends
cultures.  and be agile in terms of its processes and
products. 
Risk identification and discussion Mitigating factors

Financial obligations & liquidity:
The company makes use of debt in financing its The company should consider
operations. This form of funding mainly requires reinvesting profits back into the
periodic repayment and interest is charged on business to allow growth and reduce the
such facilities.  gearing. Issue of ordinary shares can
also be considered to decrease the level
of debt in the business. 
Safety of employees and others:
Employees are exposed to chemicals in the The company should employ well
laboratory which might cause injury to the skin trained safety officers and all employees
and eyes. Employees could be harmed if safety should regularly attend health and
procedures and controls are not carried out safety courses. 
properly. This may further lead to shutting down of
affected factories and its laboratory. 
Risk identification and discussion Mitigating factors

Socio-political unrest:
High unemployment rates, cultural The company should consider its spending
differences, political ideologies, and service in CSI, especially projects that bring stability
delivery protest around the country. Unrest to communities where it operates. The
in the community may lead to the sabotage of company should also invest in the
the company’s infrastructure or difficulties in empowerment of people in the community
10
about:blank 12/15
accessing the facilities.  and continue to create more jobs for the
locals. 
High proportion of credit sales: The company should consider undertaking
A relatively high portion of sales are made on proper analysis and understanding of its
credit and the company is thus susceptible customers and put in place proper credit
to high bad-debts and high investment in control procedures. It must also
working capital.  continuously monitor the company’s
investment in working capital and effect
changes as and when it is necessary. 
Regulatory compliance: The company should appoint and retain

As a listed company, SKD is exposed to the skilled, knowledgeable and experienced
risks of non-compliance to various staff in the legal and compliance department
regulatory requirements such as: JSE listing to monitor and control regulatory
requirement, IFRS, Companies Act, Cross- compliance. 
border taxation, Transfer pricing. 
The fact that no discount is given to Working capital management should be
customers. This could perhaps lead to a prioritised and skilled finance staff must be
decline in sales as consumers might shop employed to keep this under control and
where the terms are more favourable.  updated as and when. There should be
sound policy and procedures in place. 
The fact that no interest is charged on Working capital management should be
outstanding debts. This could lead to an prioritised and skilled finance staff must be
increase in bad debt and in turn, poor cash employed to keep this under control and
flow. Debtors can take as long as they want to updated as and when. There should sound
settle their accounts and there are no policy and procedures in place. 
consequences. Poor working capital
management could lead to SKD not having
cash in order to take advantage of other
opportunities. 
10
e) A regular market exists therefore the joint cost for the period will be reduced by the total
NRV of the production of the by-product in February 2022.
Calculation of joint-cost:
R1 500 000 (given) – net proceeds from by-product

Net proceeds from by-product:
(50 litres X 1500) r/w - (50 litres X 100) r/w
= R75 000 – R5 000
= R70 000
Therefore R1 500 000 (given) - R70 000 (c) Whatever you calculated as net proceeds, if it was
11
about:blank 13/15
deducted from the R1500 000 you would have been awarded a mark..
= R1 430 000
Joint cost allocated between the joint products based on physical measures:
Skin moisturiser:
1000litres/ (1000+800) r/w for dividing by 1800
litres X R1 430 000 Alternative:
=R 794 444 If you don’t have the proceeds
Eye serum: from by-product ie the R70 000,
you would have lost the first 3
800litres/ (1000+800) r/w for dividing by 1800
litres X R1 430 000 marks. However, we accepted it
if you divided by 1850 below the
5
=R635 556
line instead of the 1800 so you
will earn 2 marks in total.
f)
AVAILABLE MARKS: 12
MAXIMUM MARKS: 10
Product Incremental income
Night-time repair Value after further processing:
1 000 litre x 0,88 x R588 x 4=
R2 069 760
r/w
Value at split-off point:

1 000 litre x R1 890 = R1 890 000 r/w
Incremental income (c)

R179 760
Retinol cream Value after further processing:
800 litre x 0,88 x R1 030 x 4 =
r/w
R2 900 480
Value at split-off point:
800 litre x R3 450 = R2 760 000r/w
Incremental income
R140 480 (c)
Product Incremental costs
Night-time repair Further processing costs:
1 000 litre x 0,88 x 10 x 4 = R35 200r/w
Retinol cream Further processing costs:

r/w
800 litre x 0,88 x 15 x 4 = R42 240
Conclusion
Night-time repair R179 760 - R35 200 = R144 560 (c)
Process the skin moisturiser further into
Night time repair (P)
Retinol cream R140 480 – R42 240 = R98 240 (c)
Process the eye serum further into
Retinol cream (P)
12
available
12 max 10
about:blank 14/15
(g) Any five risks related to the environment.
1. If SKD does not continuously put measures in place and monitor its processes, they might
expose the environment or their staff to the chemicals they use in the manufacturing process
and this might cause harm to the environment/employees/consumers. This could lead to
litigation/reputational damage. The same risk for chemical spillage at the manufacturing plant.
2. If the Packaging Division does not place emphasis on producing packaging solutions for all
SKD’s skin and hair products taking the effect of plastic on the environment into account, SKD
will contribute to the carbon footprint of the plastic they produce which in turn could lead to
fines/reputational damage. This links to number 1 above but is more focused on the plastic.
3. How does SKD discard of the chemicals they use during manufacturing so that it is not harmful
to people and the environment?
4. SKD might face compliance risk and other legal implications if they do not continue to have
measures in place that keep their carbon footprint and impact of their operations on the
environment, at a minimum.
5. What about the amount of water they use during manufacturing of their products?
6. If SKD does not do business sustainably, their impact on global warming and carbon emission
could potentially harm the company’s reputation.
Any five risks related to the environment.

As long as it is linked to the environment 5
and the scenario you can earn a mark.
But MUST be linked to the environment.
TOTAL MARKS [60]
REFERENCES
Roos, S, Cairney, C, Chivaka, R, Fourie, H, Joubert, D, Mohammadali, H, Pienaar, A, Stack,
L, Streng, J, Swartz, G & Williams, J. 2011. Principles of management accounting: a South
African perspective. 2nd edition. Cape Town: Oxford University Press Southern Africa.
Skae, FO, Benade, FJC, Combrink, A, de Graaf, A, Jonker, WD, Ndlovu, S, Nobatyi, AE,
Plant, GJ, Steyn, BL & Steyn, M. 2017. Managerial Finance. 8th edition. South Africa:
LexisNexis.
©
UNISA 2022
All rights reserved. No part of this document may be reproduced or transmitted in any form or by any
means without prior written permission of Unisa.
13
about:blank 15/15

Test 2 Mark Plan For Students June 2022

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Test 2 Mark Plan For Students June 2022

Uploaded by

Copyright:

Available Formats

11/05/2024, 16:58 Test 2 Mark plan for students June 2022

MAC3761/Mark plan for students/T02-2022

MAC3761 Test 02-2022

Department of Management Accounting

MAC3761/Mark plan for students/T02-2022

Take note that in this suggested solution,  indicates 1 mark.

E-mail: MAC3761-22-Y1@unisa.ac.za or MAC3761@unisa.ac.za

MAC3761/Mark plan for students/T02-2022

QUESTION 1 SKD LIMITED

A) CALCULATE THE WEIGHTED AVERAGE COST OF CAPITAL

INSTRUMENT MARKET VALUE COST OF E QUITY

20 000 000 shares x R24,20  r/w P0 = 2 000c x 1,1 x 1,1

INSTRUMENT MARKET VALUE COST OF PREF.

INSTRUMENT MARKET VALUE C OST OF P REF.

MAC3761/Mark plan for students/T02-2022

INSTRUMENT MARKET VALUE COST OF LOAN

*If you consistently used a before tax interest rate

INSTRUMENT MARKET V ALUE COST OF DEBENTURES

Ordinary shares R484 0,198 9,86% 1,95%

Preference shares R1 213 0,496 12,25% 6,08%

Term loans R117 0,047 9,43% 0,44%

Debentures R628 0,257 79,72% 20,49%

Total R2 442 1 / 100% 28,96% P

(P) mark for reflecting the

끫殀끫殀끫殤 歼 歼 끫殀끫殀끫殺 歼 歼 끫殀끫殀끫殢1 歼 歼 끫殀끫殀끫殢2

( 끫殀끫殀끫殤 x 끫歼끫殤)+ (끫殀끫殀끫殺 x 끫歼끫殺) + (끫殀끫殀끫殢1 x 끫歼끫殢1) + (끫殀끫殀끫殢2 x 끫歼끫殢2)

MAC3761/Mark plan for students/T02-2022

Available marks: [18]

(P) mark for concluding whether the company meets the

MAC3761/Mark plan for students/T02-2022

QUESTION 1 SKD LIMITED (continued)

B) EVALUATION OF THE GROUP’S DIVIDEND POLICY

Ordinary dividends paid 18 19 r/w 20 r/w

Dividend pay-out ratio* 3,06% 3,18% 3,37% (c) all

MAC3761/Mark plan for students/T02-2022

2022: 100 cents x 20 000 000 shares = R20 000 000

2020 2021 2022

Dividend payout ratio  3,06% 3,18% 3,37% (c) all three

Discussion points: (Maximum = Any 3 marks)

 Dividends are not paid in the same % ratio as earnings. 

MAC3761/Mark plan for students/T02-2022

(P) mark for concluding/interpreting

MAC3761/Mark plan for students/T02-2022

C) PROPOSED CHANGES TO WORKING CAPITAL MANAGEMENT

Late payment interest:

Advice:  (P) Any one mark

Workings:  (For presentation)

Decrease in bad debt expenses (R68m x 20%) 14

Late payment interest 33

MAC3761/Mark plan for students/T02-2022

Any five risk indicators with its corresponding mitigation.

Risk identification and discussion Risk mitigation

MAC3761/Mark plan for students/T02-2022

in long-term contracts with its customers. 

Risk identification and discussion Mitigating factors

Risk identification and discussion Mitigating factors

MAC3761/Mark plan for students/T02-2022

Regulatory compliance: The company should appoint and retain

R1 500 000 (given) – net proceeds from by-product

MAC3761/Mark plan for students/T02-2022

Value at split-off point:

Incremental income (c)

Retinol cream Further processing costs:

끫殀끫殀끫殤歼歼 끫殀끫殀끫殺歼歼 끫殀끫殀끫殢1 歼歼 끫殀끫殀끫殢2