Units of a tools component

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Master Tools Ltd. Is currently operating its business at 75% level, producing 38275 units of a tools component and proposes to increase capacity utilization in the coming year by 33 1/3 % over the existing level of production.
The following data has been supplied:

(1)Unit cost structure of the product at current level:

Rs.
Raw Material 5
Wages 2
Overheads 3
Fixed Overhead 2
Profit 3
_____
15

(i) Raw Material will remain in stores for 1 month before issued for production. Material will remain in process for further 1 month. Suppliers grant 4 months credit to the company.

(ii) Finished goods remain in godown for 2 months

(iii) Debtors are allowed credit for 2 months.

(iv) Lag in wages and overheads payments in 1 month, and these expenses accrue evenly throughout the production cycle.

(v) No increase either in cost of inputs or selling price is envisaged

You are required to prepare a Projected Profitability statement and the Working Capital Requirement at new level, assuming that a minimum cash balance ofRs.20000 has to be maintained.

Reference no: EM131005288

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