MBA4807

ACCOUNTING FOR MANAGERS

January/February 2022
Duration: 3 Hours

First Examiner: Ms L Terre Blanche

Second Examiner: Ms MF Mamaregane
External Examiner: Dr F Munzhelele

THIS IS A NON-VENUE BASED INDIVIDUAL EXAMINATION

THIS EXAMINATION PAPER CONSISTS OF 8 PAGES

This examination question paper consists of three (3) pages.

INSTRUCTIONS TO CANDIDATE
• This examination will take place on 24 January 2022 from 08:00 to 11:00.
• Please note that the onus rests on you to ensure that your answer script uploaded onto Moodle is the
final and correct version. No amendments to submissions will be accepted after the closing time.
• No late submissions will be accepted, and late submissions will be awarded a zero mark.
• Please number your answers correctly.
• The uploaded answer script must have a cover page (provided). Please ensure that the module code,
your registered name, identity number and student number appear on the cover page.
• The answer script must have the signed honesty declaration form (provided). Please ensure that you
read, understand and sign the form.
• Answer each section/question of the examination on a new page (indicating the section/question and
the module code on the page).
• The answer script must be in PDF format only and the following naming convention of the final file must
be used when submitting the document on Moodle: STUDENT NUMBER_MBA4807
• It is your responsibility to ensure that the submitted document is not password protected and the file
submitted is not corrupted. If the marker is unable to access or open the submission document, you will
be awarded a zero mark for the examination.
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Graduate School of Business Leadership

Examination Declaration of Honesty Form
▪ This declaration form must be personally completed by the candidate only.
▪ This form declares that the candidate commits to the University’s assessment policies and procedures applicable to this examination.
▪ Any candidate who fails to submit the declaration form will be deemed to not agree with the University’s assessment policies and as
such will not participate in the assessment.
▪ The completed form must be uploaded on the Moodle platform along with your examination.

CANDIDATE SURNAME

CANDIDATE FULL NAMES

ID/PASSPORT NUMBER

STUDENT NUMBER

MODULE CODE

MODULE NAME

CONTACT DETAILS
DECLARATION
• I declare that all the details provided by me on this form are true and correct.
• I am aware that the assessment date and time for MBA4807 is the 24th of January 2022 from 08:00 to 11:00.
• I undertake to comply with all the rules, regulations and policies of the University pertaining to this assessment.
• I agree that it is my responsibility to ensure that I have internet access to enable me to access Moodle during the
assessment period (Jan/Feb 2022).
• I agree that it is my responsibility to personally download and/or print and/or access the question paper provided
to me via the Moodle and to upload my answer sheets to the Moodle and that any late submission will not be
marked and will be graded at 0%.
• I am aware that my completed assessment must only be submitted via the Moodle platform.
• I am aware that the assessment will be conducted in the medium of English only.
• By submitting the MBA4807 assessment on the 24th of January 2022, I declare that:
• I have read the Unisa’s Students’ Disciplinary Code, available at
https://www.unisa.ac.za/static/corporate_web/Content/Apply%20for%20admission/Documents/Unisa-Students-
Disciplinary-Code-25-April-2014.pdf
• I have read the Policy for Copyright Infringement and Plagiarism, available at
https://www.unisa.ac.za/static/corporate_web/Content/Colleges/CGS/documents/copyrightinfringement_and_pla
giarism_policy_16nov05.pdf
• I know what plagiarism is, that plagiarism is wrong and that disciplinary steps can be taken against me if I am found
guilty of plagiarism.
• The MBA4807 Exam that I submitted is my own work and I have not received assistance and/or given
assistance from/to any person in completing this assessment.
• I have independently and individually completed the assessment without copying work from any other person/s
• I have not allowed any other student to copy my work.
• I know that if I am found to be in violation of this declaration I will receive 0% for this assessment and that Unisa
may investigate further and institute disciplinary action against me.

CANDIDATE
SIGNATURE

DATE

2
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EXAMINATION COVER PAGE

MBA4807
JAN/FEB 2022
ACCOUNTING FOR MANAGERS
STUDENT NUMBER

FULL NAME

IDENTITY NUMBER

Question Marks
No
Examiners Moderator
1 2 3

Total

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SECTION A – FINANCIAL ACCOUNTING [50 MARKS]

Question 1 (5 marks)

Financial statements are the means by which accountants communicate to external users. Recent
financial reporting scandals have focused attention on the accounting profession and its role in the
preparation of these statements and the audits performed on these statements.

Required:

a) Who is responsible for the preparation of the financial statements that are included in a
company’s annual report?

b) Who performs and audit of the financial statements as referred to above in a)?

c) Why is it important for those who are responsible for an audit of the financial statements to be
independent of those who prepare the statements? Explain your answer.

Question 2 (5 marks)

You are the manager / controller for an architectural company whose financial year-end is on 31
December. As part of the management team, you receive a year-end bonus directly related to the
company’s earnings for the year. One of your duties is to review the transactions recorded by the
accountants. A new accountant recorded the receipt of R10 000 in cash as an increase in cash and an
increase in turnover. The R10 000 is a deposit, and the accountant explains to you that the company
plans to provide the services to the client in March of the following year.

Required:

a) Did the accountant correctly record the client’s deposit? Explain your answer.

b) What would you do as controller for the company? Do you have a responsibility to do anything
to correct the accounts? Explain your answer.

Question 3 (30 marks)

BPO’s management believes the company has been successful at increasing sales because it has not
increased the selling price of its products even though its competition has increased prices and costs
have increased. Price and cost relationships in Year 1 were established because they represent industry
averages. The following income statements are available for BPO’s first three years of operation:

Year 3 Year 2 Year 1

Sales R125 000 R110 000 R100 000
Cost of goods sold R62 000 R49 000 R40 000
Gross profit R63 000 R61 000 R60 000
Operating expenses R53 000 R49 000 R45 000
Net income R10 000 R12 000 R15 000
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Required:

a) Prepare a common-size comparative income statement for the three years. (15)

b) Explain why net income has decreased while sales have increased. (5)

c) Prepare an income statement for year 4. Sales volume in units is expected to increase
by 10% and costs are expected to increase by 8%. (5)

d) Do you think BP should raise its prices or maintain the same selling prices?
Explain your answer. (5)

Question 4 (10 marks)

Billabong Motors is having a bad year. Net profit is only R37 000. Also, two important overseas
customers are falling behind in their payments to Billabong and Billabong’s accounts receivable are
ballooning. The company desperately needs a loan.

The board of directors is considering ways to put the best face on the company’s financial statements.
Billabong’s bank closely examines cashflow from operations.

Bob Marley, Billabong’s accountant, suggests reclassifying as long-term the receivables from the slow
paying clients. He explains to the board that removing the R80 000 rise in accounts receivables from
current assets will increase cash provided by operations.

This approach might help them get the loan.

Required:

Identify the ethical, economic and legal issues with the above decision and explain what the board
should do.

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SECTION B – MANAGEMENT ACCOUNTING [50 MARKS]

QUESTION 1 (25 marks)

Sondela Crafts is a small company that specialises in the manufacture of curios to customer
specifications. The company recently opened a specialised unit that is dedicated to the
manufacture of a curio piece popularly known as “Ilala”. The unit is staffed by manager and various
sales personnel. The unit manager is remunerated on a fixed salary basis and the sales personnel
receive a fixed salary plus commission. As part of a review of the first year of operations, the unit
manager has provided you with the following information as part of an effort to assess the unit’s
financial viability:
R
Selling Price per unit 600
Variable manufacturing cost per unit 390
Facilities rental per annum 1 200 000
Salaries (excluding sales commissions) 4 000 000

The unit manager is unsure of how to deal with selling and administration expenses. She has
extracted the following information from the cost ledgers:

Cost Units
R2 750 000 125 000
R3 500 000 250 000
Ignore taxation for purposes of answering this question.

Required:

(a) Determine the break-even point in units and in rand value. (6)

(b) Management is considering a proposal from the sales force that would see them
forego their sales commission for an increase in their salaries. The proposal would
see fixed salaries increase by a total sum of R1 620 000. What would be the new (3)
break-even point in units under such a scenario?

(c) Head office is considering, as an incentive based on the original information, paying
the unit manager R6,00 per unit sold in addition to her current fixed salary. Such
incentive is conditional upon the unit manager making an annual profit of R500 000
plus R50 profit per unit sold. How many units must be sold under such a scenario? (5)

(d) Based on the information in (c) above, calculate the margin of safety (%) and explain (6)
its meaning.

(e) List five key assumptions underlying cost-volume-profit analysis. (5)

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Question 2 (25 marks)

Lalakahle (Pty) Limited is a manufacturing business that produces handmade quality beds and
mattresses. The company is setting its budget for 2018/2019 for the orthopaedic range of beds
and mattresses that it sells. There are two top of the range beds in this line, the ‘Down bed’ and
the ‘Dreamcast’. You are the accountant at Lalakahle (Pty) Limited and your task is to prepare
the budgets for the coming year. You have been given the following information:

As a result of using specialised forecasting computer software it has been forecast that the number
of units to be sold is likely to be as follows, for both the 2018/2019 and 2019/2020 financial years:

Number of beds sold Sales price per bed

Down bed 1 056 R850
Dreamcast 1 176 R755

At the end of 2017/2018 there were 75 Down beds and 64 Dreamcast beds were still in inventory.
It is company policy to maintain enough inventories of beds at the end of each month to meet
demand for 55% of the next month’s forecast sales. The sales and production of both products
tend to be evenly distributed throughout the year.

Both beds are made from the same raw materials. These are wood, plastic and treated nylon.
These are required in the following quantities per bed in terms of output (finished product):

Down bed Dreamcast

Wood 15kg 21kg
Plastic 6kg 3,5kg
Treated nylon 17 square metres 19 square metres

Some wastage occurs during the manufacturing process. This is 1,5% of wood and plastic and
3% of nylon. This material wastage has no further use.

At the end of 2017/2018 most of the remaining raw material inventory was sold to another company
because the warehouse was undergoing essential maintenance. The budget should allow for
inventory levels to be built up to normal levels of 25% of the next month’s usage. The raw materials
that remained at the end of 2017/2018 were:

Wood 196kg
Plastic 72kg
Treated nylon 62 square metres

Current prices are as follows:

R
Wood 4,60 per kg
Plastic 5,50 per kg
Treated nylon 21,00 per square metre

It is expected that these prices will rise in August 2018 by 2%

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The labour requirements for each bed are as follows:

Down bed Dreamcast

Skilled 5hrs 6hrs
Unskilled 4hrs 4,5hrs

Skilled labour costs R14,00 per hour and unskilled labour costs R6,50 per hour

The financial year runs from June to May

Required:

(a) In your role as accountant, produce the following budgets for the year 2018/2019:

(i) Sales budget in units and in rand value. (2)

(ii) Production budget in units. (4)
(iii) Materials usage budget in units. (4)
(iv) Materials purchases budget in units and in value. (Only show total requirement
for period June – July and August – May. Do not show individual monthly (6)
requirements)
(v) Labour budget in hours and in value. (4)

(b) Describe how the approach used to construct these budgets differs from the
methods used in the public service. (5)

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UNISA 2022