Working capital management - query very urgent

IPCC 624 views 4 replies

Chandrakumar.k

STUDENT

77 Points Joined January 2013

Please clarify me it would be great helpful to understand further problem.

Regards,

Chandrakumar

Dear Friends,

Please clarify me the below doubts. It would be greatful if I get immediate assistance from you because I am preparing IPCC nov exam by myself without coaching. Please have a look and advise me in this problem.

Please tell me how to calculate fixed manufacturing exp and opening stock and closing stock for 2years

CAMIB Limited commencing a new project..... Annual Production 12000 Units and following info

Cost per Unit

Material 40

Direct Labor 20

Fixed Manufacturing exp. 6

Dep. 10

Fixed admin exp 4

The selling price is Rs 96 and selling exp. 5 per unit, 80% of which is variable.

1st year Production 6000

2nd year Pro.. . 9000

Sales : 5000 (1st year

8500 (2nd year)

Stock of material : 2.25 , WIP : Nil, Debt: 1 month's average cost of sales, Cash 10000, creditors 1 month average purchases, creditors exp 1 month aver, Valuation of fineshed goods stock at average cost,

Prepare , project statement of p&l and projected steatemnet of working capital requirements

Replies (4)

Jaikishan

168 Points Joined May 2012

In my view as regards opening stock kindly find calculation

1st Year

As opening stock is zero, hence as per formula,

Opening stock +production-sales=Closing stock

0+6000-5000=1000 (Closing stock)

2nd year

1000 (As closing stock of one year is opening of other)+9000-8500=1500 (Closing stock)

Fixed manufactuing cost

As regards fixed manufacturing cost it will be on annual production 12000 hence 12000*6, since it will not be calculated on actual (i.e.9000 or 6000) as it is fixed.

Still you can have a second view also for better confirmation

Chandrakumar.k

STUDENT

77 Points Joined January 2013

Sir, I am really thankful to you. Yes, I have doubt in fixed manufacturing exp and fixed admin exp.

In both, in book answers, they are taking 12(cost per unit in Fixed manufacutring exp and Rs 8 for fixed admin exp when in question I can see only Rs 6 and Rs 4 respectively. Please clarify me, it is quite difficult to understand.

Thanks in advance

Jaikishan

168 Points Joined May 2012

Might be the fixed cost and admin cost will be for 2 yrs hence doubled.

CA. Abhishek K. Pandey

Manager (Advance)

901 Points Joined March 2008

1. Fixed costs are always calculated wrt to max. capacity, unless stated otherwise. In present case: a. Fixed Manf. Exps.: 6*12000=72000 b. Fixed Admin. Exps.: 4*12000=48000

2. Stock Position: It seems like a manufacturing concern, hence, inventory position of Raw Material, WIP and Finshed Goods, all have to be calculated.

I don't see question provide info for all. I won't calculate all for you, but may guide.

Opening stock in 1st yr. will be nil. Closing FG in 1st will be: 1000*60 and in 2nd will be 1500*60. 60 is assumed after excluding fixed charges. Opening in 2nd yr. will be closing for 1st.