IGCSE Accounting Paper-2: Specimen Questions with Answers 165 - 167 of 189

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Passage

Ankita is a manufacturer. Her financial year ends on 31st March. She sells her output at 30 % mark up.

She provided the following information for the year ended 31st March 2019.

 \$ Prime Cost 25000 Factory Overheads 4200 Cost of production 20800

Question 165 (3 of 5 Based on Passage)

Edit

Write in Short

Calculate the estimated gross profit for the year if the new machine is purchased. (Marks 4)

Explanation

 \$ Prime Cost 32500 Factory Overheads 5200 Cost of Production 37700

Question 166 (4 of 5 Based on Passage)

Edit

Write in Brief

One Liner▾

Calculate the gross profit for the year ended 31st March 2019. (Marks 1)

Explanation

Ankita is planning to purchase a new machine costing \$ 10,000. Also, she can invest additional capital of \$ 4000.

Question 167 (5 of 5 Based on Passage)

Edit

Write in Short

Suggest two ways in which Ankita could get the additional funds required to purchase the machine. (Marks 2)

Explanation

(I) By admitting a new partner

(II) Loan from bank

Explanation:

• The source of finance will depend on its suitability for Ankita. The admission of a new partner will bring additional capital in the business which can be utilized for purchasing the machine without increasing any liability of the business.
• However, this can also dilute the ownership and control of Ankita on her business. Contrarily, loan from bank is an external liability but can be suitable if Ankita does not want to lose control over her business.

Ankita estimated that machine if purchased would affect the following as-

(i) Prime Cost would directly proportional to the output which increases by 30 %

(ii) Factory overheads would increase by \$ 1000

(iii) Markup would have to be reduced to 20 %

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