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ABC Ltd is currently producing 2000 units per month

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ABC Ltd is currently producing 2000 units per month. It is contemplating to increase the monthly production to 4000 units by working an extra shift such that the work started in the first shift will continue in an extra shift.

A quantity discount of 10% on all purchases is expected from the supplier. The selling price, variable cost, and fixed cost will remain unchanged.                         

Following is the Income Statement of the current year:

Other Information:

1. The credit period allowed to customers is 3 months and will remain the same.
2. The lag period for payment of suppliers will remain the same at 2 months.
3. Wages and overheads are paid with a lag of half month and will remain the same.
4. Finished goods stock at present is maintained at 4500 units. This will double with a change in production.
5. Raw material holding period is 3 months.
6. The WIP period is 1 month and is valued at (RM + Wages). It is a practice with the company that, for WIP valuation, RM is taken at 100% and Wages at 50%.

You are required to prepare the Income Statement for next year after an increase in monthly production.

Also find out the working capital need for both, present and next year.