Grade 11 Report
On the 31 may 2008, the end of the financial year Speed deliveries has the following 3 delivery vehicles on their books. Speed deliveries deliver parcels and documents to the cities in the cape peninsula. The 3 delivery vehicles each service a different region i.e.the west coast, the east coast and inland. On an average the 3 vehicles should travel about the same mileage each month.
Fixed asset register:

Asset Vehicle 1 Date of purchase 1 June 2004
Cost price R120 000 Depreciation rate 20% p.a on cost

Record of depreciation:
Date depreciation Accumulated depreciation Book value
31 may 2005 24000 24000 96000
31 may 2006 24000 48000 72000
31 may 2007 24000 72000 48000
31 may 2008 24000 96000 24000

asset Vehicle 2 Date of purchase 1 December 2006
Cost price R180000 Depreciation rate 20% p.a on cost

Record of depreciation:
date depreciation Accumulated depreciation Book value
31 may 2007 18000 18000 162000
31 may 2008 36000 54000 126000

asset Vehicle 3 Date of purchase 1 September 2007
Cost price R220 000 Depreciation rate 20% p.a on cost

Record of depreciation:
Date depreciation Accumulated depreciation Book value
31 may 2008 33000 33000 187 000

The local car dealer, Alpine Motors has approached Speed deliveries with a special promotion that they are offering. An identical vehicle to the 3 delivery vehicles above at a cost price of R220 000 plus the option of a maintenance plan for a period of 3 years at an additional cost of R15 000.T he owner of speed deliveries believes this is a good deal and is considering trading in one of the above mentioned vehicles against the new vehicle, but is ensure which vehicle to trade in.
He has asked the accountant to give him details as to the running costs of the 3 vehicles for the past year and he has been given the following information:
Vehicle 1 Vehicle 2 Vehicle 3
Mileage travelled 90 000 km 120 000km 70 000km
Courier charges earned R220 000 R110 000 R60 000
Repairs and maintenance R8 000 R15 000 R2000
Fuel and oil R45 000 R85 000 R28 000

REQUIRED:
The owner of Speedy deliveries is not sure if he should take up the offer of the new vehicle and if so which vehicle to trade in for the new vehicle. He is also concerned about the costs that have been given to him and feels that there are large differences between the 3 vehicles that should not exist.
1. Should he take advantage of the new special offer and buy a new vehicle? Why?
2. If he was to trade in a vehicle which one of the three do you advise he trades in? Why?
3. Is the owner justified in his concern over the costs of the 3 vehicles? Why?
4. What advice can you give the owner in order to maintain effective control over the delivery vehicles in future?


CRITERIA : A clear decision given that is backed up by substantive information.
8 marks

If he was to trade in a vehicle which one of the 3 do you advise he trades in? Why? Excellent decision showing great insight into the benefits of trading in a particular vehicle. 16 marks

Is the owner justified in his concern over the costs of the 3 vehicles? Why?Excellent discussion showing insight into why the owner should be concerned .10 marks

What advice can you give the owner in order to maintain effective control over the delivery vehicles in the future?
Excellent advice given which indicates a good understanding of the control of the vehicles 16 marks

1.yes he should.it is temporary.has high mileage and will be better for a new vehicle instead of still having a depreciated vehicle.
2.he would trade in vehicle 3 it has cost him less for repairs and requires low fuel.
3.yes he is concerned about whether he is making a good deal or not. He is concerned about his benefits as well as whether it is profitable
4.he should make sure his vehicle is economical and allocate reasonable distances.