8. With the following information, prepare a statement showing the working capital required to finance a level

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8. With the following information, prepare a statement showing the working capital required to finance a level of activity of 10,400 units per annum:

(i) Selling price @`5 per unit

(ii) The expected ratios of cost to selling prices are:

(a) Raw material 40%

(b) Direct wages 10%

(c) Overheads 30%

(d) Profit 20%

(iii) Raw materials are expected to remain in store for an average period of two months before being used for production and materials are in process on an average period of six weeks.

(iv) Finished goods will stay in store approximately for six weeks before dispatch to customers.

(v) Credit allowed to debtors is for a period of two months.

(vi) Credit allowed by creditors is for a period of two months.

(vii) Lag in payment of wages and overheads is for a period of two weeks.

(viii) Cash in hand and bank is expected to be `10,000. It may be noted that production is carried on evenly during the year and wages and overheads accrue similarly.

Assume 4 weeks a month.

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Financial Management

ISBN: 9789352605606

1st Edition

Authors: Swapan Sarkar, Bappaditya Biswas, Samyabrata Das, Ashish Kumar Sana

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