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UNIVERSITY OF EDUCATION
TRUTH, THE ULTIMATE VIRTUE

SUBMITTED TO:
Dr. Naukhaiz CH
SUBMITTED By :
Nimra Nazim (bsf2103360)
DEPARTMENT :
BBA3th (Morning)
COURSE TITTLE:
Accounting

University of Education Lahore Faisalabad

(Campus)

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INTRODUCTION
Name of the Business:
Threads and needle
manufacturer
Investment:
5 to 6 LAKH
Product:
CD Lace
Owner of the Business:
Nimra Nazim
Bank Account:
Bank Alfalah Limited
Area:
Samnabad Faisalabad

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Business Introduction:
Designer lace
beautifies the dress and adds an elegant look to
every designer wear. Designer lace-making is a
popular and traditional business. Any person can
start this designer lace business as a home based
with comparatively less investment. Lace is a craft
material that used in a textile. In previous days the
lace was actually crafted by needles manually.
Nowadays handmade lace making is replaced by
machinery lace making. Presently we have
numerous types of machines that can make lace
through machines.

Working Machine:

Different spindle and bobbing machines can also be procured.

According to your need you should choose the right machinery. These machines offer

 A range of roller patterns

 Straight or curvilinear edge cutting and edge treatment for smooth , melting ,
no rough edges
 Two or more layers of fabric can be stitched together without thread replacing
the sewing needles, good welding strength.
 Cut out the several patterns of holes, and treatment of side melting.
 Single or more cutting of the material simultaneously and treatment of side
melting avoiding burr.
 Simultaneous sealing, cutting and embossing to have production
synchronously.

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This is sequence cutter machine which is about 350000. This machine is imported
from China and also available model town linked road Lahore.

Sequence Roll:

Sequence roll is used for the

production of CD lace. Sequence roll is passed
through sequence cutter machine where needles
cut and design and convert a role into a CD lace
which is raped around the disc.

Production:

1 sequence roll = 250 CD

1 day production= 4 roll × 250 CD

Product Unit Cost:

Direct material = 40 per CD

1 Roll / 250

(10000 / 250)

Direct Labor = 1 Rs per CD

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M.O.H

Indirect material = 10 + 0.2

= 10.2

Indirect labor = 0.03

(1000/ 30000)

Electricity Cost = 0.2

(6000/30000)

Rent = 0.3

(10000/30000)

Product Unit Cost = 51.73

Fixed Cost (Per month):

Rent = 10,000

Administrative Expense = 50,000

Guard = 1000

Total = 16,000

Variable Cost (Per Unit):

Electricity cost = 0.2

Direct material = 40

Indirect material = 10.2

Direct Labor =1

Total = 51.4

Manufacturing Overhead Expenses (Per Month)

Rent = 10,000

Electricity = 6000

Cost = (10.2× 30000)

Indirect material = 306000

Indirect labor = 1000

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Total = 323,000

Income Statement:

Threads and Needles Manufacturer

Contribution Format Income Statement
Sales ( 30000×55) 1650,000
Variables exp:
CGS ( 30000 × 51.73) 1551900
Contribution Margin 98100
Administrative expenses 5000
Net operating income 93100

Break Event Point

Profit = ( P – V ) × Q - F.E

0 = ( 55 – 51.4 ) Q – 18100

0 = ( 3.6 ) Q - 18100

Q = 18100/ 3.6

Q = 5028 unit

Q = 5028× 55

Q = 276540 Rs

Unit Sales to Break Even

Unit Sales to Break Even = 0+ F.E

C.M per unit

= 18100/3.6

= 5028 units

Rupee Sales to Break Even

Rupee Sales to Break Even = T.P + F.E

CM ratio

= 18100/ 0.0654

= 276, 540 Rs

Degree of Operating Leverage

Degree of operating leverage = C.M

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Net O.I

= 98100/ 91000

= 1.07

Margin of Safety in Rupees

Margin of Safety in Rupees = Total actual sales – Break over sales

= 1650000 - 276540

= 1373460

Margin of Safety in Percentage

Margin of safety percentage = Margin of safety in Rs

Total actual Sales

= 1373460/ 165000

= 83 %

Sales Budget:

Threads and needle manufacturer

Sale Budget
For the year ended Dec31,2022
Sr.No Description 1st quarter 2nd quarter 3rd quarter 4th quarter Yearly
1 Budget unit sale 80000 70000 120000 90000 360000
2 Sale price 55 55 55 55 55
3 Total Sale 4400000 3850000 6600000 4950000 1980000
Cash Collection
60% cash collected on sale quarter and 40% will be collected on following quarter
4 1st quarter sale 260000000 1760000 4400000
5 2nd quarter sale 2310000 1540000 3850000
6 3rd quarter sale 3660000 2640000 6600000
7 4th quarter sale 2970000 2970000
8 Total cash colle. 2640000 4070000 5500000 5610000 17820000

Production Budget:

Threads and needle manufacturer

Production Budget

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For the year ended Dec31,

Sr.No Description 1st quarter 2nd quarter 3rd quarter 4th quarter Yearly
1 Budget unit sale 80000 70000 120000 90000 360000
2 Add ending Invt. 14000 24000 18000 20000 20000
3 Total need 94000 94000 13800 110000 380000
4 Less begging Invt. 10000 14000 24000 18000 10000
5 Total production 84000 80000 14000 92000 37000

Direct Material Budget:

Threads and needle manufacturer

Direct Material budget
For the year ended Dec31,2022
st
Sr.No Description 1 quarter 2nd quarter 3rd quarter 4th quarter Yearly
Required
1 84000 80000 114000 92000 370000
production
Raw material
2 40 40 40 40 40
needed
Need to meet
3 3360000 3200000 4560000 3680000 14800000
Production
4 desired ending 640000 912000 736000 800000 800000
5 total need 4000000 4112000 5296000 4480000 15600000
6 Less opening 600000 640000 912000 736000 600000
Cost of raw
7 material to be 3400000 347200000 4384000 3744000 15000000
purchased

50% cash paid in period of purchase and 50% in following quarter

10 1st quarter sale 1700000 1700000 3400000
11 2nd quarter sale 1736000 17360000 3472000
12 3rd quarter sale 2192000 2192000 4384000
13 4th quarter sale 1872000 1872000
14 Total cash colle. 1700000 3436000 3928000 4046000 13128000

Direct labor Budget

Threads and needle manufacturer

Direct labor budget

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For the year ended Dec31,2022

Sr.No Description 1st quarter 2nd quarter 3rd quarter 4th quarter Yearly
Required
1 84000 80000 114000 92000 370000
production
2 Labor Hour p/u 0.5 0.5 0.5 0.5 0.5
Total D.L.H
3 42000 40000 57000 46000 185000
needed
4 per hour cost 1 1 1 1 1
5 total D.L.COST 42000 40000 57000 46000 185000

Manufacturing Overhead Budget

Threads and needle manufacturer
Manufacturing overhead budget
For the year ended Dec31,2022
Sr.No Description 1st quarter 2nd quarter 3rd quarter 4th quarter Yearly
Units to be
1 84000 80000 114000 92000 370000
produced
2 variable cost p/u 10.4 10.4 10.4 10.4 10.4
total variable m.o.h
3 873600 832000 1185600 956800 3848000
cost

fixed
4 33000 33000 33000 33000 33000
manufacturing cost

total manufacturing
5 906600 865000 1218600 989800 3980000
cost

Predetermine overhead rate:

M.O.H/ALLOCATION BASE

Total manufacturing overhead for the year = 3980000

Budgeted direct labor hours = 185000

Pre-determined overhead rate = 21.5

Cash Budget

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Threads and needle manufacturer

Cash Budget

For the year ended Dec31,2022

Sr.No Description 1st quarter 2nd quarter 3rd quarter 4th quarter Yearly

1 cash collection 2640000 4070300 5500000 5610000 17820000

2 less disbursement:

3 direct material 1700000 3436000 3928000 4046000 13128000

4 direct labor 42000 43000 57000 46000 185000

5 M.O.H 906600 865000 1218600 989800 3980000

Administrative
7 expenses 15000 15000 15000 15000 150000

Cash available (23600) (286000) 268800 500600 467000

Budgeted Income Statement

Threads and needle manufacturer
Budgeted income statement
For the year ended Dec31,2022
Sale 19800000
Cost of goods sold ( 51.73 × 360000) 18622800
Gross margin 1177200
Selling and admin expenses (60000)
Net operating income 1117200

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