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MODULE NAME: MODULE CODE:

FINANCIAL MANAGEMENT 2A FINM6211/d/w

ASSESSMENT TYPE: REVISED EXAMINATION‐PAPER ONLY

TOTAL MARK ALLOCATION: 180 MARKS
TOTAL TIME: The time given to students to complete this assessment will be
indicated on your module in Learn.
By submitting this assessment, you acknowledge that you have read and understood all the rules as
per the terms in the registration contract, in particular the assignment and assessment rules in The
IIE Assessment Strategy and Policy (IIE009), the intellectual integrity and plagiarism rules in the
Intellectual Integrity Policy (IIE023), as well as any rules and regulations published in the student
portal.

INSTRUCTIONS:
1. Please adhere to all instructions. These instructions are different from what is normally
present, so take time to go through these carefully.
2. Independent work is required. Students are not allowed to work together on this assessment.
Any contraventions of this will be handled as per disciplinary procedures in The IIE policy.
3. No material may be copied from original sources, even if referenced correctly, unless it is a
direct quote indicated with quotation marks.
4. All work must be adequately and correctly referenced, where required.
5. You should paraphrase (use your own words) the concepts that you are referencing, rather
than quoting directly.
6. Marks will be awarded for the quality of your paraphrasing.
7. This is an open‐book assessment.
8. Assessments must be typed unless otherwise specified.
9. Ensure that you save a copy of your responses.
a. Complete your responses in a Word document or as otherwise specified.
b. The document name must be your Name.Student number.Module Code.
c. Once you have completed the assessment, upload your document under the
submission link in the correct module in Learn.
Additional instructions:
1. Calculators are allowed.
2. Answer All Questions.
3. Show all calculations, where applicable (marks may be awarded for this).

4. You will only be able to submit scanned/photo of handwritten document or Microsoft word
documents.
5. You may use Excel. If Excel is used, then all calculations must be shown in order to receive
method marks.
6. If you are using a Word Document:
a. Use the following to reflect your calculations:
b. Multiply x – small letter x or *

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c. Division / forward slash.

d. Addition and subtraction + and ‐
e. Square roots and equations – using the function insert ‐ equation.
f. Tables – using the function insert – table.
g. Working with tables – use merge and split cell functions through right click function.
h. Fitting tables to pages – Autofit to window/content through right click function.
i. Layout of table – Section breaks and landscape orientation through layout – breaks
and layout orientation in the ribbon.
j. If you are not familiar with all the functions in Word it is recommended that you rather
do a hardcopy if possible.
k. The document name must be your Name.Student number.Module Code.
l. Once you have completed the assessment, upload your document under the
submission link in the correct module in Learn.
7. If you are completing in a hardcopying/ by hand:
a. Ensure that all your pages are numbered on the top right hand side of the page – e.g.
1 of 12.
b. Perform your calculations as you normally would. Please work neatly so that you do
not lose marks because your lecturer cannot read your writing.
c. Either (i) Scan your pages OR (ii) photograph your pages. Ensure that the pages are in
the correct order.
d. Label your photographs as follows: Name.Student number.Module Code.Page 1; (for
each page.
e. Once you have completed the assessment, upload your document under the
submission link in the correct module in Learn.

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Question 1 (Marks: 10)

The Steinhoff saga, possibly the biggest case of corporate fraud in South African business history,
has dominated financial and general news since the company’s share price collapsed on
5 December 2017.

The reality is that it seems as though the crisis at Steinhoff is more than an overstatement of income
and asset values which has triggered a liquidity and credit crunch. It is about the collapse of
corporate governance and great levels of unethical business leadership.

Required:
 Do some research (use sources other than your prescribed textbook) and explain why it is
important for businesses to have ethical standards and codes of conduct for financial
managers.
 Include another example where poor ethical practices by people in a management or trust
position have led to significant losses.
Remember to reference your answer and add your reference list to the bottom of this question.

Question 2 (Marks:15)
Gelmite & Sons Hardware is considering introducing a cash discount policy to its customers so as to
improve current sales. There are three possible scenarios that include monthly estimates. Gelmite
& Sons uses a 60% mark up on cost on all their products as a general rule. Fixed costs are R8 000
per month.

Scenario A: Representing the Current Scenario

Company sold 600 units of the spark nail which they ordered at a wholesaler in Shoppers Town for
a cost price of R100 each.

Scenario B: Representing initial sales target

Company will sell 800 units of the spark nail which they ordered at a wholesaler in Shoppers Town
for a cost price of R100 each.
These sales units are achieved after the introduction of a 20% markdown on the original selling
price.

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Scenario C: Representing a scenario where sales targets are surpassed

Company will sell 1 000 units of the spark nail which they ordered at a wholesaler in Shoppers Town
for a cost price of R100 each. In order to achieve the increased sales, additional marketing costs of
R3 000 will be incurred.
These sales units are achieved after the introduction of a 20% markdown from original selling price.

Required:
Which of the three scenarios would you recommend to management? Provide a reason for your
answer with reference to net profit before tax.

Question 3 (Marks: 25)

The following forecasted information was taken from the books of Pakhama Enterprises.

Month 2020 Budgeted Sales

January 120 000
February 140 000
March 168 000
April 144 000
May 128 000
June 100 000

The following information is also provided for Pakhama Enterprises:

60% of all sales is on credit.
Debtors are expected to pay their debts as follows:
• 70% in the first month after the sale (after 30 days)
• 20% in the second month after the sale (after 60 days)
• 7 % in the third month after the sale (after 90 days)
• 3% is irrecoverable
Credit losses are written off at the end of the month in which the last instalment is received.
Debtors will amount to R104 994 on 1 Jan 2020.
Total sales for 2019 are as follows:
• October 2019 = R120 000
• November 2019 = R132 000
• December 2019 = R135 000

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Required:
Q.3.1 Prepare the schedule of budgeted receipts from debtors for the period 1 January (18)
2020 to 31 March 2020. Round to two decimals.

Q.3.2 Pakhama Enterprises wants to extent its credit terms in order to increase the sales to (7)
grow the business. A consultant has, however, warned them that this can lead to
overtrading.
Do some research on overtrading and prepare and e‐mail to management in which
you explain what overtrading is as well as what the dangers of overtrading are.
Remember to reference your answer and add your reference list to the bottom
of this question.

Question 4 (Marks:35)
Q.4.1 Do some research (use sources other than your prescribed textbook) on the
traditional costing system and the activity‐based costing (ABC) system and answer
the following questions. Remember to reference your answer and add your
reference list to the bottom of this question.
Q.4.1.1 Discuss any two differences between the traditional costing system and (4)
the activity‐based costing (ABC) system for a business.
Q.4.1.2 Identify one characteristic in organisation that make them more suited to (2)
using ABC method as opposed to the traditional costing method. Provide
a reason for your answer.
Q.4.1.3 Discuss three advantages of activity‐based costing. (6)

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Q.4.2 Betta Ball Sports manufactures two products (Rubber Soccer Ball & Leather Soccer (23)
Ball) using the same machinery processes. You are provided with the following
information relating to the existing production period

Product Volume Material cost Direct Labour Machine Time

per unit (R) Cost per unit per unit
(R) (Hours)
Rubber Ball 1 000 5.00 5.50 0.35
Leather Ball 700 20.00 2.00 1.00

Total production Overheads are as follows:

Machine department: R50 000 (machine hours is the cost driver)
Set‐up costs: R5 000
Ordering Costs‐materials: R2 000
Handling materials: R8 000

An analysis of production overhead activities for the period for the volume of
products manufactured revealed the following:
Product # set‐ups # material orders # times material
were handled
Rubber Ball 1 1 2
Leather Ball 2 1 3

Calculate the total budgeted product cost per unit for the Rubber Ball using
Activity Based Costing (ABC). Round all answers to two decimal places.

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Question 5 (Marks: 30)

Maureen has decided to produce and sell cricket bats in her spare time. She has a shaded area that
was constructed at a cost of R68 000 several years ago, and which will be used for production
purposes. Maureen has determined that each cricket bat will require R300 in wood and grip of R60.
Other minor expenses like varnish and stickers is estimated to be R10 per bat in total.

She will hire students to do most of the work and pay them R350 for each cricket bat completed.
She will rent tools at a cost of R2 000 per month. The total monthly electricity bill is R1 500. It is
estimated that 40% of this is attributable to the production of the cricket bats and the remainder is
for Maureen’s personal use and is paid in her personal capacity. Maureen has drawn R48 000 out
of her savings account to provide the capital needed to get the operation going. The savings were
earning interest at 6% annually. An advertising agency will handle advertising at a cost of R1 000
per month. Maureen will hire students to sell the cricket bats and pay a commission of R20 per bat.

Required:
Q.5.1 From the above information, identify all examples you can find of the following
types of costs (a single item may be identified as more than one type of cost).
Also indicate the relevant rand amount relating to each cost (either per unit or
per month depending on the type of cost):
Q.5.1.1 Variable costs (5)
Q.5.1.2 Fixed costs (4)
Q.5.1.3 Selling and administrative costs (2)
Q.5.1.4 Product costs (6)
Q.5.1.5 Manufacturing overhead costs (3)
Q.5.1.6 Sunk costs (1)
Q.5.1.7 Opportunity costs (2)

Q.5.2 Maureen is currently looking into a business opportunity that will require her to (7)
manufacture branded match T‐shirts for a local cricket club. Although she thinks it
might be a good opportunity, she is a bit wary of accepting the contract as her free
time is limited and she will only be able to produce 100 T‐shirts per month.

T‐shirts will be sold at R200 each to club members.

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The costs associated with the opportunity are as follows.

Description Costs
Cost of material for T‐shirt R40 per shirt
Cost of printing R5 per shirt
Labour costs R25 per shirt
Variable overhead costs R10 per shirt
Fixed overhead costs R15 000 per month

Required:
Calculate the break even point in units and advise Maureen whether she should
take up the opportunity or not. Provide a reason for your answer.

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Question 6 (Marks: 35)

The following information relates to a company G6 Ltd for the year ended 30 June 2020:

Transaction totals for the year ended 30 June 2020 R

Credit purchases of raw materials 503 750
Freight on raw materials purchases (on credit) 99 833
Sales of finished products 11 440 000
Direct labour:
Factory wages 828 600
Pension fund contributions paid by employer 172 500
Medical aid paid by employer 227 200
UIF contributions paid by employer 8 144
Indirect labour 500 250
Electricity :
Factory 211 450
Administrative offices 127 900
Rent expense:
Factory 82 700
Administrative offices 105 900
Telephone and fax:
Factory 111 166
Administrative offices 145 438
Insurance:
Factory 205 894
Administrative offices 132 716
Selling and administrative costs 327 195
Stationery 60 445
Salaries and administrative staff 488 250
Sales returns of finished products 49 361
Consumables stores (indirect materials issued to the factory) 144 710
Depreciation on factory machinery 180 211

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Balances on 1 July 2019 R

Raw Materials inventory 127 894
Work in process inventory 43 394
Finished goods inventory 216 450

Balances on 30 June 2020 R

Work in process goods on hand 617 450
Raw materials on hand 99 000
Finished products on hand 477 716

Required:
Prepare the production cost statement, trading statement and the relevant notes for the year
ended 30 June 2020.

Question 7 (Marks:30)
Poma Africa Ltd manufacture tennis racquets. The company uses the job costing system to cost its
production. The following information relates to Poma Africa Ltd for the month of April 2020:
Schedule of costs relating to jobs in process as at 31 March 2020
Job Direct Material Direct Labour Overheads Total
A33 1 050 2 100 315 3 465
C23 3 300 5 900 920 10 120

Schedule of costs incurred on jobs during April 202

Job (No of units) Direct Material Direct Labour
A33 (20 racquets) 2 400 450
C23 (55 racquets) 11 800 2 300
F54 (25 racquets) 3 700 690
L49 (15 racquets) 1 300 350

Additional information
 Factory overheads are applied at a rate of 10% of total direct cost.

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 The only job still in process at 30 April 2020 was L49. All other jobs were completed during
the month.
 Job C23 was completed at a total cost of R25 630, this amount includes applied overhead
costs of R1 410.
 Sales during April were as follows: A33: All 20 racquets were sold at cost plus 40% mark‐up.
F54: 23 racquets were sold at a price of R290 per racquet. C23: All 55 racquets were sold at
cost plus 35% mark‐up.
 Actual factory overheads for April 2020 were R3 250.
 Marketing and distribution expenses amount to R4 700 for the month of April 2020.
 Ignore spoilage.

Required:
Round to two decimal places where necessary.
Q.7.1 Calculate the cost of jobs A33 and F54 completed during April 2020. (9)

Q.7.2 Calculate the closing work‐in‐process as at 30 April 2020. (4)

Q.7.3 Calculate the net income for the month of April 2020. (10)

Q.7.4 Calculate the closing balance of finished goods as at 30 April 2020. (2)

Q.7.5 Calculate the over/under applied overhead for April 2020. (5)

END OF PAPER

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