[Ans. 4,53,631] Ex. 16. Foods Ltd. is presently operating at 60% level producing 36,000 packets of snack foods and proposes to increase capacity utilisation in the coming year by 33% over the existing level of production. The following data has been supplied: (i) Unit cost structure of the product at current level: 4 Raw Material Wages Overheads (Variable) Fixed Overhead Profit Selling Price 22 1 3 12 (ii) Raw materials will remain in stores for 1 month before being issued for production. Material will remain in process for further 1 month. Suppliers grant 3 months credit to the company. (iii) Finished goods remain in godown for 1 month. (iv) Debtors are allowed credit for 2 months. (v) Lag in wages and overhead payments is 1 month and these expenses accrue evenly throughout the production cycle. (vi) No increase either in cost of inputs or selling price is envisaged. (vii) Calculation of debtors may be made at selling price. Prepare a projected profitability statement and the working capital requirement at the new level, assuming that a minimum cash balance 19,500 has to be maintained. [Ans. Profit 1,56,000; Working Capital Required 1,25,000] [Hints (1) Work-in-process is assumed to be 50% complete as regards wages and overheads with full material consumption. As wages and overheads are given to accrue evenly throughout the production cycle, it is assumed that these will be in process for half a month on an average. (2) It has been assumed that there will be no increase in the stock levels due to increase in capacity.]