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Cash Conversion cycle has been presented here-in-below:
|
Cash Conversion Cycle |
||||||
|
Sl No |
Particulars |
2017 (Anon., 2017) |
2016 |
2015 (Anon., 2015) |
2014 |
2013 (Anon., 2013) |
|
1 |
Inventory Turnover Period |
58.36 |
60.57 |
59.95 |
60.05 |
63.34 |
|
2 |
Debtors Turnover period |
32.03 |
30.71 |
31.41 |
36.15 |
43.46 |
|
3 |
Creditors Turnover Period |
40.99 |
39.32 |
40.20 |
46.16 |
55.38 |
|
4 |
Cash Conversion Cycle |
49.40 |
51.96 |
51.16 |
50.04 |
51.42 |
Note: Since data of purchase is not available, cost of sales have been taken into consideration.
Further, on analysis of Cash flow statement of past 2 years on may observe that cash flow from operating activity has shown an uptrend and has increased roughly by 5 Mio. Also, the same has been mainly on account of increase in receipt from customer. There has also been a significant increase in payment of expenses to employees. Further, one may also observe that cash and cash equivalent has increased.
Question 2
On analysis of the proposed suggestion given be respected personnel of the organisation, the following working has been obtained:
Profit point of view
|
Present Scenario |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
5000 |
|
|
2 |
Selling Price |
420 |
|
|
3 |
Variable Cost |
144 |
|
|
4 |
Contribution |
276 |
|
|
5 |
Contribution whole |
|
1380000 |
|
6 |
Fixed Manufacturing Cost |
|
460000 |
|
7 |
Variable Selling and Administrative Cost |
|
180000 |
|
8 |
Fixed Selling and Administrative Cost |
|
500000 |
|
9 |
Profit |
|
240000 |
|
Suggestion 1 |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
6500 |
|
|
2 |
Selling Price |
420 |
|
|
3 |
Variable Cost |
172 |
|
|
4 |
Contribution |
248 |
|
|
5 |
Contribution whole |
|
1612000 |
|
6 |
Fixed Manufacturing Cost |
|
460000 |
|
7 |
Variable Selling and Administrative Cost |
|
234000 |
|
8 |
Fixed Selling and Administrative Cost |
|
530000 |
|
9 |
Profit |
|
388000 |
|
Suggestion 2 |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
4500 |
|
|
2 |
Selling Price |
480 |
|
|
3 |
Variable Cost |
144 |
|
|
4 |
Contribution |
336 |
|
|
5 |
Contribution whole |
|
1512000 |
|
6 |
Fixed Manufacturing Cost |
|
460000 |
|
7 |
Variable Selling and Administrative Cost |
|
162000 |
|
8 |
Fixed Selling and Administrative Cost |
|
550000 |
|
9 |
Profit |
|
340000 |
|
Suggestion 3 |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
6000 |
|
|
2 |
Selling Price |
420/390 |
|
|
3 |
Variable Cost |
144 |
|
|
4 |
Contribution |
276/246 |
|
|
5 |
Contribution whole |
|
1611000 |
|
6 |
Fixed Manufacturing Cost |
|
460000 |
|
7 |
Variable Selling and Administrative Cost |
|
216000 |
|
8 |
Fixed Selling and Administrative Cost |
|
560000 |
|
9 |
Profit |
|
375000 |
On the profit profit if one consider the best suggestion which maximises the profit of the group shall be suggestion 1 under which the profit has been maximised.
Break even point of view
|
Present Scenario |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
5000 |
|
|
2 |
Selling Price |
420 |
|
|
3 |
Variable Cost |
144 |
|
|
4 |
Contribution |
276 |
|
|
5 |
Variable Selling and Administrative Cost |
36 |
|
|
6 |
Net Variable |
240 |
|
|
7 |
Fixed Manufacturing Cost |
|
460000 |
|
8 |
Fixed Selling and Administrative Cost |
|
500000 |
|
9 |
Break even quantity |
|
4000 |
|
Suggestion 1 |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
6500 |
|
|
2 |
Selling Price |
420 |
|
|
3 |
Variable Cost |
172 |
|
|
4 |
Contribution |
248 |
|
|
5 |
Variable Selling and Administrative Cost |
36 |
|
|
6 |
Net Variable |
212 |
|
|
7 |
Fixed Manufacturing Cost |
|
460000 |
|
8 |
Fixed Selling and Administrative Cost |
|
530000 |
|
9 |
Break even quantity |
|
4670 |
|
Suggestion 2 |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
4500 |
|
|
2 |
Selling Price |
480 |
|
|
3 |
Variable Cost |
144 |
|
|
4 |
Contribution |
336 |
|
|
5 |
Variable Selling and Administrative Cost |
36 |
|
|
6 |
Net Variable |
300 |
|
|
7 |
Fixed Manufacturing Cost |
|
460000 |
|
8 |
Fixed Selling and Administrative Cost |
|
550000 |
|
9 |
Break even quantity |
|
3367 |
|
Suggestion 3 |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
6000 |
|
|
2 |
Selling Price |
420/390 |
|
|
3 |
Variable Cost |
144 |
|
|
4 |
Contribution |
276/246 |
|
|
5 |
Variable Selling and Administrative Cost |
36 |
|
|
6 |
Net Variable |
240/210 |
|
|
7 |
Fixed Manufacturing Cost |
|
460000 |
|
8 |
Fixed Selling and Administrative Cost |
|
560000 |
|
9 |
Break even quantity |
|
4437.5 |
Suggestion 2 is best
Margin of Safety View point
|
Present Scenario |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
5000 |
|
|
2 |
Selling Price |
420 |
|
|
3 |
Break even quantity |
4000 |
|
|
4 |
MOS Quantity |
1000 |
|
|
5 |
Margin of safety sales |
|
420000 |
|
Suggestion 1 |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
6500 |
|
|
2 |
Selling Price |
420 |
|
|
3 |
Break even quantity |
4670 |
|
|
4 |
MOS Quantity |
1830 |
|
|
5 |
Margin of safety sales |
|
768679.2 |
|
Suggestion 2 |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
4500 |
|
|
2 |
Selling Price |
480 |
|
|
3 |
Break even quantity |
3367 |
|
|
4 |
MOS Quantity |
1133 |
|
|
5 |
Margin of safety sales |
|
543840 |
|
Suggestion 3 |
|||
|
Sl no |
Particulars |
Per unit |
Amount |
|
1 |
Sales |
6000 |
|
|
2 |
Selling Price |
420/390 |
|
|
3 |
Break even quantity |
4438 |
|
|
4 |
MOS Quantity |
1562 |
|
|
5 |
Margin of safety sales |
|
656040 |
Suggestion 1 is best
Qualitative parameter
Suggestion 3 shall be best as the same is practical as discount under initial sales shall entice the customer and intense advertisement shall result in increased sales and the future sales can be made without discount. Thus, it shall be the most practical solution under the present scenario.
Question 3
|
Statement showing cost of production |
|||||
|
Sl No |
Particulars |
Present Scenario |
Scenario 1 |
Scenario 2 |
Scenario 3 |
|
1 |
Present Sales per year |
72000 |
72000 |
72000 |
72000 |
|
2 |
Direct Material Cost |
75 |
75 |
75 |
75 |
|
3 |
Direct Labour Cost |
35 |
35 |
35 |
35 |
|
4 |
Variable Factory overhead |
10 |
10 |
10 |
10 |
|
5 |
Fixed Factory over head |
20 |
|
|
|
|
6 |
Variable selling and Admin cost |
25 |
|
|
|
|
7 |
Fixed selling and Admin Cost |
20 |
|
|
|
|
8 |
Cost of production |
185 |
120 |
120 |
120 |
|
9 |
Additional cost on account of production being bottleneck |
|
|
|
18.20 |
|
10 |
Total cost |
185 |
120 |
120 |
138.20 |
Since profit data has not been provided, the contribution analysis has not been undertaken. Further, the additional cost on account of restricted production has been considered as bottleneck in scenario 3 and the additional cost of 65*7000 has been allocated over 25000 products.
Part 2 of question 2
If the production capacity had been 1,00,000 units company can think of long term vision and say yes to the present deal as the same shall expand the production capacity and economies of scale might also be achieved. Further, company will be able to pitch in a new customer and shall be able to make profit from it in the long run.
On social front, increased production creates positive image for the company in the form of employment generation and better market image. On economic front increase in profits over the long run and customer acquisition.
Further, I shall propose CEO of the company to charge dollar 120 per unit under the initial stage to acquire the customer and reap benefits of increased sales and profit in long run. The same shall be in line with the qualitative and quantitative requirements.
Anon., 2013. JB HI-FI.
Anon., 2015. JB HI-FI.
Anon., 2017. JB HI-FI
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