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    Argosy University/ Phoniex University/
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Category > Management Posted 06 Jan 2018 My Price 9.00

Net Working Capital

Prepare an estimate of Net Working Capital requirement for ABC Ltd. from the following information:-

 

Estimated cost of production per unit                    Rs. 170 which includes;-

                Raw Material                                                     Rs. 80

                Direct Labour Cost                                                           Rs. 30

                Overheads (exclusive of Depreciation)                 Rs. 60

                Selling Price per unit                                                     Rs. 200

 

Level of activity per Annum                                                        1,40,000 units

Raw Material in Stock:                                                  average 4 weeks

Work in Progress (assume 50% completion stage)

Finished Goods in Stock:                                                              average 4 weeks

Credit allowed by suppliers:                                                      average 4 weeks

Credit allowed to Debtors:                                                          average 4 weeks

Leg period in payment of wages                                               average 1.5 weeks

Cash at Bank expected as Rs. 25,000.

 

You may assume the production is carried out evenly throughout the year (52 weeks) and wages and accrue similarly.

 

All sales are on credit basis only.

Add 10% for contingencies.

 

You may state your assumptions, if any.

ASSUMPTIONS:-

(1)    All Sales are made on credit.

(2)    It has been assumed that the material has been introduced at the commencement of the process.

(3)    All Materials procured on credit basis only.

(4)    Leg in payment of Wages is 1.5 weeks only, hence it can be ignored

(5)    Leg in Payment of Overheads is Nil.

(6)    There is no depreciation charge..

(7)    No provision is made for Contingency in trade being all Debts are good

Answers

Maurice Tutor
(5)
Status NEW Posted 06 Jan 2018 04:01 PM My Price 9.00

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