Doubt in working capital calculation?

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This query is : Resolved

CA Ragini (Querist)

03 August 2011 Q. X Ltd has an installed capacity of producing 1.25 lakhs tonnes of product per annum its present capacity utilisation is 80 %. The co. produces product in 200 kg bags. The estimated cost structure per bag is as follows-

basic raw material 90

packing material 10

direct labour 50

production overheads 25

dep. 15

administrative overheads 10

selling overheads 30

it is given that the product is in process for a period of 0.5months ( assume 50% of basic raw material are required in the beginning and the balance is needed at a uniform rate during the process. conversion cost are to be taken at 50%)

PLEASE EXPLAIN ME HOW TO CALCULATE STOCK OF WORK IN PROGRESS AND TREATMENT FOR CONVERSION COST CLEARLY, AS I DO UNDERSTAND CONVERSION COST IS RELATED TO CALCULATION OF DIRECT LABOUR AND PRODUCTION OVERHEADS.....IS THERE ANY CALCULATION OF CONVERSION COST WITH RAW MATERIAL TOO

Prachi Agarwal

Prachi Agarwal (Expert)

05 August 2011 Installed Capacity(in kg) 125000000 A
Utilised Capacity (in kgs) 100000000 B
Bags produced p.a 500000 C B/200
Bags produced in one cycle 20833.33333 D (C/12)*.5

Per bag W.I.P
Raw Material 45 937500
22.5 468750
Direct Labour 25 520833
Production Overheads 12.5 260417
TOTAL 2187500

Sorry but if u cud let me know your id i will send you the excel sheet
Administrative overheads unless specifically related to production will not
form part of W.I.P
Selling overheads will never form part of W.I.P

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