Q. 13. XYZ Limited is consdering the purchase of a new machine which would carry out some operations at present performed by manual labour. The two alternative models under consideration are A and B. The following information, from which a profitability statement is to be prepared for submission to the Board of Directors, is available : Machine "A' Machine "B" F F Cost of Machine 3,00,000 -5,00,000 Estimated Life (In years) substation 10 12 Estimated Savings-in Scrap per annum 20,000 30,000 Additional Cost of Supervision per annum 32,000 Additional Cost of Maintenance per annum 14,000 22,000 Cost of Indirect Material per annum 12,000 16,000 Estimated Savings in Wages : Wages per Worker per annum boston 1,200 Workers not required 150 200 The rate of taxation may be regarded as 50 per cent of profits. Which model can be recommended for purchase? Give reasons for your answer. 24,000 1,200 4 Q. 15. Supreme Limited sells goods at a gross profit of 25%. Depreciation is taken into account as part of cost of production. The following are the figures given to you- Sales (two month's credit) 18,00,000 Material consumed (one month's credit) 4,50,000 Wages paid (one month lag in payment) 3,60,000 Cash manufacturing expenses (one month lag in payment) 4,80,000 Administration expenses (one month lag in payment) 120,000 Sales promotion expenses (paid quarterly in advance) 60,000 Income tax payable in 4 instalments of which one lies in the next year 1,50,000 The Company keeps one month's stock of raw materials and finished goods. It also keeps * 1,00,000 in cash. You are required to estimate the working capital requirements of the company assuming 15% safety margin