NCEA Level 3 Accounting 91408 Management free practice questions with answers

Question 1 (22 marks) [Choosing between two options]

(a) Noa is a self-employed wedding photographer. Noa must choose one of two options for the year ending 31 March 2027. The first six months are the winter months ending 30 September 2026. Option 1:

add video to the wedding photography package. Noa expects to sell 12 weddings over the six winter months at $1 400 each. Variable costs are $550 per wedding. Insurance for the six months is $700, and other fixed costs paid in cash (studio and software) are $600 per month. Noa will buy camera and video gear costing $9 500 on 1 April 2026, paid for with a $7 000 loan from family and the rest from cash. Option 2: do contract work for a local photographer. The contract would pay $3 800 a month, and Noa expects contract expenses of $850 a month. On 1 April 2026 the business has $4 500 in the bank, whichever option is chosen. Complete the comparative cash budget for the six winter months ending 30 September 2026. Items already entered are shown; calculate the others.

(a) Answer: Surplus (deficit): Option 1 $3 400, Option 2 $17 700; closing cash: Option 1 $7 900, Option 2 $22 200

• Evidence level: Achieved (calculates each receipt and payment from the information given).

• Option 1 receipts: customers 12 × $1 400 = $16 800; plus the loan $7 000 gives total receipts $23 800.

• Option 1 payments: variable costs 12 × $550 = $6 600; insurance $700; other fixed costs 6 × $600 = $3 600; equipment $9 500; total payments $20 400.

• Option 1 surplus (deficit) = $23 800 − $20 400 = $3 400, so closing cash = $4 500 + $3 400 = $7 900.

• Option 2: contract income 6 × $3 800 = $22 800; contract expenses 6 × $850 = $5 100; surplus = $17 700, so closing cash = $22 200.