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.