X Ltd. plans to manufacture and sell 400 units of electronic appliances per month at a price of ₹600 each. The ratios of cost to selling price are as follows: Raw Material 30%, Packing Material 10%, Direct Labour 15%, Di

Answer 4(a) Calculation of total cost of (400 x 12) 4800 units Particulars Amount (₹) Raw material (30% x ₹600 x 4800 units) 8,64,000 Packing material (10% x ₹600 x 4800 units) 2,88,000 Direct labour (15% x ₹600 x 4800 units) 4,32,000 Direct expenses (5% x ₹600 x 4800 units) 1,44,000 Fixed overhead 4,32,000 Total cost 21,60,000 Total sales (4800 x ₹600) 28,80,000 Profit 7,20,000 Current Assets Particulars ₹ Raw material (₹8,64,000 x 30/300) 86,400 Packing material (₹2,88,000 x 15/300) 14,400 Work in progress Raw material (100%) (₹8,64,000 x 7/300) 20,160 Direct Labour (50%) (₹4,32,000 x 7/300 x 50%) 5,040 Direct Expenses (50%) (₹1,44,000 x 7/300 x 50%) 1,680 Fixed Overhead (50%) (₹4,32,000 x 7/300 x 50%) 5,040 Total Work in Progress 31,920 Finished goods (₹21,60,000 x 150/4800) 67,500 Debtors (4800 x 600 x 80% x 30/300) 2,30,400 Total current assets (without cash) 4,30,620 Cash balance (10% of 4,30,620) 43,062 Total Current Assets (A) 4,73,682 Current liabilities Particulars ₹ Creditors for Raw Material (₹8,64,000 x 21/300) 60,480 Creditors for Packing Material (₹2,88,000 x 21/300) 20,160 Direct Expenses (₹1,44,000 x 15/300) 7,200 Fixed Overhead (₹4,32,000 x 15/300) 21,600 Total Current liabilities (B) 1,09,440 Net Working Capital (A)-(B) 3,64,242 Maximum permissible bank finance under second method of financing as per Tandon Committee norms ₹ Total Current Asset 4,73,682 Less: 25% of current assets (1,18,421) 3,55,261 Less: Current liabilities (1,09,440) Maximum permissible bank borrowings 2,45,821 Note: In the solution, debtors are calculated on selling price, debtors can also be calculated at cost price.