Accounting And Financial Management FORMATIVE ASSESSMENT 2 AFC102 Calculate the ratios for 2024 (fully stated to two decimal places e.g. 2.14:1; 23.67%) that would reflect each of the following and comment on your answers. Use only the formulas provide

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Table of Contents
QUESTION 1 ............................................................................................................. 4

1.1.1 Economic order quantity .................................................................................... 4

1.1.2 The number of orders to be placed annually based on the economic order
quantity....................................................................................................................... 5

1.1.3 The total ordering costs and total carrying costs. .............................................. 5

1.2 REQUIRED .......................................................................................................... 6

QUESTION 2 REQUIRED ........................................................................................ 10

2.1.1 Percentage return on sales (net profit margin) (4 marks) ................................ 12

2.1.2 Percentage return earned by the shareholders (4 marks) ............................... 12

2.1.3 Debt to assets ratio (4 marks) ......................................................................... 13

2.1.4 Debt to equity ratio. (4 marks) ......................................................................... 13



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QUESTION 3 (20 Marks) ......................................................................................... 15

3.1 REQUIRED ........................................................................................................ 15

3.2 REQUIRED ........................................................................................................ 17

3.2.1 The number of tests that need to be administered to break even. ................... 17

3.2.2 The fee that the racehorse owners should be charged for each test if an operating
profit of R900 000 per month is targeted by the laboratory. ...................................... 18

3.3 REQUIRED ........................................................................................................ 19

3.3.1 Break-even value ............................................................................................ 19

3.3.2 Sales value required to achieve an operating profit of R720 000. ................... 20

QUESTION 4 REQUIRED ........................................................................................ 20

QUESTION 5 (20 Marks) REQUIRED...................................................................... 25

5.1 Payback Period of Project A (expressed in years, months and days)................. 26

5.2 Accounting Rate of Return on initial investment of Project A .............................. 27

5.3 Net Present Value of both projects. .................................................................... 27

5.4 Internal Rate of Return of Project A. ................................................................. 28




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QUESTION 1

1.1 REQUIRED Use the information given below to calculate the following:

Monthly sales: 3,750 units

Selling price per unit: R14

Purchase price: Cost plus 40% (meaning the selling price is 140% of cost)

Carrying cost: 10% of the unit purchase price

Ordering cost: R100 per order

1.1.1 Economic order quantity

Annual Demand (D)

Monthly sales = 3,750 units

Annual demand (D) = 3,750 × 12 = 45,000 units

Unit Purchase Price (P)

Selling price = R14 (which is 140% of cost)

14
So, cost (purchase price) = = 𝑅 10
1.4


Purchase price (P) = R10

Carrying Cost per Unit (H)

Carrying cost = 10% of purchase price = 0.10 × R10 = R1 per unit per year

Ordering Cost (S)

Ordering cost (S) = R100 per order




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