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ABC Apparels

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Introduction

ABC Apparels Ritesh Kumar, Chief executive of ABC apparel is busy searching for market information on the current value of fashion apparels for kids between the age group six to fourteen. Since 2005 when Ritesh took over the position from his father was keen on maintaining business standards and evolving ways for sustained cash flows from the business. ABC Apparel is a is a prime manufacturing unit specializing garments for Kids of the age group 6 to 16 years, located in Indore (M.P.). Indore is seen as a preferred destination for garment manufacturing among other cities such as Jalandhar, Ludhiana and Surat to name a few. Indore city has a dedicated cloth market, which caters to manufacturers, whole sellers and retailers in industry. Earlier about 20 years back the city was termed as having major potential to produce raw cloth in various categories. Indore had many cloth mills operating till early nineties. Still despite of being devoid of manufacturing advantage, the city is producing large amount of cloth through its automatic and semi-automatic power looms. Looking on to the supply side, garment manufacturing is quite prevalent in Indore. ...read more.

Middle

Exhibit 3 is the current costing for the firm. Patel explains that on an average a piece of garment requires 1.1 meters of raw cloth. The cost of raw material is put up as per the actual costing involved. The calculations for raw cloth are shown in Exhibit 4. Also, direct material is put up based on the approximate direct material used for all the products. Direct labor is calculated based on total direct labor expenses in 2007 and the anticipated production of 100,000 units. The unit cost is calculated based on these projections. Exhibit 5 shows the segmentation in direct labor and the unit costing. Overheads are calculated based on previous experience. Overheads are considered to be 37.5% of the direct labor. Ritesh after contemplating on more details asked Patel to provide him with the actual expenses under several heads. Ritesh was wondering why certain expenses such as Administrative cost, Designing cost and house keeping are considered as direct labor expense instead of overheads in unit cost calculations for direct labor. Ritesh further identified various activities under the overheads. He was convinced that Administrative cost, Designing cost and house keeping are a part of overall overhead. ...read more.

Conclusion

14897 24828 Depreciation Sewing M/c 600 600 900 900 Dyeing Setup 0 960 0 1440 Exhibit 8 Heads Budgeted Actual Supervision 120000 148765 Receiving & Handling 72000 78935 Junior Tailors 192000 201300 Senior Tailors 600000 598815 Dyers 144000 161500 Embroidery 72000 70365 Metal & Button 72000 75600 Iron 84000 89450 Inspection 72000 76300 Packing & Shipping 108000 112080 Total 1536000 1613110 Overheads recalculated(data for FY 2007) Heads Budgeted Actual Designing 96000 121800 Sewing M/c Dep 6000 6000 Dyeing M/c Dep. 4800 4800 General Expense 36218 36218 Electricity 109018 109018 Rent 480000 480000 Administration expense 300000 335750 Storage 240000 240000 House Keeping 48000 51700 Maintenance 9600 12300 Meals 162000 164250 Total 1491636 1561836 NOTE: General Expenses Includes Telephone Fax Photocopying Courier Stationary Exhibit 9 Annual Sales (FY 2007) No of Units produced Actual Budgeted Ratio P1 27265 20000 0.22 P2 21135 15000 0.17 D1 31210 27000 0.26 D2 42425 38000 0.35 122035 100000 1.00 Exhibit 10 P1 P2 D1 D2 Raw Cloth 170.5 158.4 184.8 174.9 Thread 2 2 3 3 Metal & Buttons 7 7 12 12 Zip 7 7 7 7 Miscellaneous 12 12 12 12 Dye 0 25 0 25 Bleach 3 3 5 5 Cartons pack 1 1 1 1 Price Tags 1 1 1 1 ...read more.

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