London College of Accountancy

Cyril Peters is a resident of the Republic. He is 52 years old and is married in community of property. The following information relates to the 2024 year of assessment for Cyril and his wife, Naledi. Income from a South African source: - A salary of R520 000 from his employer, a motor manufacturing company. - He does part-time academic work for a private higher education college and earned an income of R110 000 as part of his business income for the year of assessment. - Net rentals of R96 000 was earned from a bachelor flat in Margate. - Interest of R34 000 was earned from various short-term investments. Income from a South African source for Naledi: - Rent received from an out-house on their property amounted to R75 000. Cyril made contributions of R6 500 per month to a medical scheme on behalf of himself, his wife and child. He paid R48 000 qualifying medical expenses for the year. His employer contributed R40 000 to the medical scheme during the year. He installed solar roof panels at his home to the value of R60 000 in June 2023. A provisional tax payment of R25 000 was also made on 31 August 2023. Required: Calculate Cyril’s normal tax liability for the 2024 year of assessment.

Swann Manufacturers commenced trading on 01 March 2024 with the intention of producing plastic chairs. During March 2024 the following transactions took place: 20 000 chairs were manufactured of which 18 000 were sold at an introductory price of R100 each. Fixed manufacturing costs amounted to R250 000 whilst the variable manufacturing costs amounted to R43 per unit. Marketing costs included R43 000 for fixed costs as well as R5 per unit sold for delivery costs. Administration costs included salaries of R50 000 and other office costs of R4 per unit sold. During April 2024 the sales and production increased to 22 000 units and 25 000 units respectively. The selling price increased to R120 per chair. Variable manufacturing costs decreased to R40 per unit whilst other variable costs per unit and the fixed costs remained unchanged. However, a sales commission of 5% of sales was introduced with effect from 01 April 2024. The first-in-first-out method is used for valuing inventories. Swann Manufacturers was using the absorption costing method to prepare its income statement but the financial manager is now keen on using the variable costing method. Separate entries are made for marketing costs and administration costs i.e. these costs are not combined. REQUIRED 1. Prepare the Income Statement for the month ended 30 April 2024 using the variable costing method. (10 marks) 2. Prepare the Income Statement for the month ended 30 April 2024 using the absorption costing method. (10 marks) 3. Reconcile the profit calculated according to absorption costing (in question 2) with the profit calculated according to variable costing (in question 1). Your answer must include the calculation of the fixed manufacturing costs in the opening and closing inventories. (4 marks) 4. Calculate the product costs and period costs for the month ended 31 March 2024 using the following methods. (Ignore inventories.) 4.1 Variable costing (3 marks) 4.2 Absorption costing.

Swann Manufacturers commenced trading on 01 March 2024 with the intention of producing plastic chairs. During March 2024 the following transactions took place: 20 000 chairs were manufactured of which 18 000 were sold at an introductory price of R100 each. Fixed manufacturing costs amounted to R250 000 whilst the variable manufacturing costs amounted to R43 per unit. Marketing costs included R43 000 for fixed costs as well as R5 per unit sold for delivery costs. Administration costs included salaries of R50 000 and other office costs of R4 per unit sold. During April 2024 the sales and production increased to 22 000 units and 25 000 units respectively. The selling price increased to R120 per chair. Variable manufacturing costs decreased to R40 per unit whilst other variable costs per unit and the fixed costs remained unchanged. However, a sales commission of 5% of sales was introduced with effect from 01 April 2024. The first-in-first-out method is used for valuing inventories. Swann Manufacturers was using the absorption costing method to prepare its income statement but the financial manager is now keen on using the variable costing method. Separate entries are made for marketing costs and administration costs i.e. these costs are not combined. REQUIRED 1. Prepare the Income Statement for the month ended 30 April 2024 using the variable costing 2. Prepare the Income Statement for the month ended 30 April 2024 using the absorption costing method.

Swann Manufacturers commenced trading on 01 March 2024 with the intention of producing plastic chairs. During March 2024 the following transactions took place: 20 000 chairs were manufactured of which 18 000 were sold at an introductory price of R100 each. Fixed manufacturing costs amounted to R250 000 whilst the variable manufacturing costs amounted to R43 per unit. Marketing costs included R43 000 for fixed costs as well as R5 per unit sold for delivery costs. Administration costs included salaries of R50 000 and other office costs of R4 per unit sold. During April 2024 the sales and production increased to 22 000 units and 25 000 units respectively. The selling price increased to R120 per chair. Variable manufacturing costs decreased to R40 per unit whilst other variable costs per unit and the fixed costs remained unchanged. However, a sales commission of 5% of sales was introduced with effect from 01 April 2024. The first-in-first-out method is used for valuing inventories. Swann Manufacturers was using the absorption costing method to prepare its income statement but the financial manager is now keen on using the variable costing method. Separate entries are made for marketing costs and administration costs i.e. these costs are not combined. REQUIRED 1. Prepare the Income Statement for the month ended 30 April 2024 using the variable costing method.

IN SOUTH AFRICA THE MEDICAL TAX CREDIT FOR A TAXPAYER THAT IS A MEMBER FOR A REGISTERED MEDICAL AID IS LIMITIED TO 7% TAXABLE INCOME FOR THE MAIN MEMBER AND ALL INDEPEDENTS. TRUE OR FALSE

the audtitors cost forms part of the commercial cost of an entity, true or false