Destion No. 2
• The per unit cost structure of a product of Royal Company Ltd for 1,04,000 units for a year of 52 weeks is
given. a) Raw Material Rs. 160 b) Direct Labour Rs. 60 c) Overheads Rs. 120 d) Total Cost Rs. 340 e) Profit Rs.
60 e) Seling Price Rs.400.
Time lag in payment of overheads is one month (Time period of four weeks is
equivalent to a month)Find out the amount of creditors for overheads.
Answer
A RS. 69.000
CO Rs. 66,000
B.O Rs. 96,000
D.O Rs. 99,000
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Answer:
The fact that cash inflows are not matched in both timing and amount by cash outflows, provides us with an operating cycle and rationale for investing in working capital. In any analysis of working capital, a distinction is made between temporary and permanent working capital requirements. The latter are a function of secular and cyclical trends in sales and operating expenses. The former depend on seasonal factors. In a proforma projection of working capital requirements, management must forecast the maximum level of current assets required to support an expected volume of sales and maximum level of short term credit it can anticipate to finance these assets.”1
Refer to Taxmann's Working Capital Management, which aims to fill the gap between theory and practice of working capital management. The finance managers will find the text worthwhile in their pursuit of updating the knowledge about current thinking & developments taking place in the area of working capital management.