TMT Limited is commencing a new project for manufacture of electric toys. The following cost information has been ascertained for annual production…

Statement Showing Cost and Sales for the First Year Annual Production Capacity 60,000 units Production 40,000 units Sales 35,000 units Particulars ₹ Sales Revenue (₹ 80 × 35,000) 28,00,000 Cost of Production: Materials @20 per unit (40,000 units) 8,00,000 Direct Labour @15 per unit (40,000 units) 6,00,000 Manufacturing Overheads: Variable @15 per unit (40,000 units) 6,00,000 Fixed (based on production capacity 60,000 units × ₹ 10) 6,00,000 Cost of Production 26,00,000 Less: Closing Stock (40,000 – 35,000 = 5,000 units) (₹ 26,00,000 / 40,000 × 5,000 units) 3,25,000 Cost of Goods Sold 22,75,000 Add: Selling & Distribution Overheads: Variable @ 3 × 35,000 units = 1,05,000 Fixed (Re. 1 × 60,000 units) = 60,000 1,65,000 Cost of Sales 24,40,000 Profit 3,60,000 Statement Showing Working Capital Requirement A. Current Assets ₹ Stock of Raw Materials (₹ 8,00,000 × 3/12) 2,00,000 Stock of Finished Goods (₹ 3,25,000) 3,25,000 Debtors at Cost (₹ 24,40,000 × 3/24) 3,05,000 Cash and Bank 60,000 Total (A) 8,90,000 B. Current Liabilities Creditors for Materials (₹ 10,00,000 × 4/12) 3,33,333 Creditors for Expenses (₹ 13,65,000 × 1/24) 56,875 Outstanding Wages (₹ 6,00,000 × 1/12) 50,000 Total (B) 4,40,208 Working Capital Requirement before Contingencies (A - B) 4,49,792 Add: Provision for Contingencies (₹ 4,49,792 × 1/9) 49,977 Estimated Working Capital Requirement 4,99,769 Workings Notes: Purchase of Raw Material during the first year Raw Material consumed during the year 8,00,000 Add: Closing Stock of Raw Materials (3 months consumption) ₹ 2,00,000 Total - 10,00,000 Less: Opening Stock of Raw Material Nil Purchases during the year 10,00,000