Question

The cost sheet of POR Ltd. provides the following data :
Cost per unit
Raw materials Rs. 50
Direct Labor 20
Overheads (including depreciation of Rs. 10) 40
Total cost 110
Profits 20
Selling price 130
Average raw material in stock is for one month. Average materials in work-in-progress is for
half month. Credit allowed by suppliers; one month; credit allowed to debtors; one month.
Average time lag in payment of wages; 10 days; average time lag in payment of overheads
244

30 days. 25% of the sales are on cash basis. Cash balance expected to be Rs. 1,00,000. Finished
goods lie in the warehouse for one month.
You are required to prepare a statement of the working capital needed to finance a level of
the acitivity of 54,000 units of output. Production is carried on evenly throughout the year
and wages and overheads accrue similarly. State your assumptions, if any, clearly.

Answer 1

Answer:

Average raw material in stock is for one month. Average materials in work-in-progress is for

half month. Credit allowed by suppliers; one month; credit allowed to debtors; one month.

Average time lag in payment of wages; 10 days; average time lag in payment of overheads

244

Explanation:

30 days. 25% of the sales are on cash basis. Cash balance expected to be Rs. 1,00,000. Finished