Question

You are required to prepare a statement showing the working capital needed to finance a level of annual activity of 52,000 units of output. The following information are available : Elements of cost Rs. per unit Raw Materials 8 Direct Labour 2 Overheads 6 Total cost 16 Profit 4 Selling price 20 Raw materials are in stock, on an average for 4 weeks. Materials are in process, on an average, for 2 weeks. Finished goods are in stock, on an average, for 6 weeks. Credit allowed to customers is for 8 weeks. Credit allowed by suppliers of raw materials is for 4 weeks. Lag in payment of wages is 1½ weeks. It is necessary to hold cash in hand and at bank amounting to Rs. 75,000. It may be noted that production is carried on evenly during the year and wages and overheads accrue similarly. [Answer : Working Capital requirement for 52,000 units

Answer 1

Answer:

1. Estimation Procedure

2. Working Capital as a Percentage of Net Sales

3. Working Capital as a Percentage of Total Assets

4. Working Capital Based on Operating Cycle

Need for Cash and Bank Balance

Need for Inventories

Need for Receivables

Provided by Creditors

Provided by Outstanding Wages and Expenses

5. Estimation of Working Capital Requirement

6. Graded Illustrations in Working Capital Estimation