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Fast please A newly formed company has applied to the Commercial Bank for the first time for financing its working capital requirements. The following information
Fast please
A newly formed company has applied to the Commercial Bank for the first time for financing its working capital requirements. The following information is available about the projections for the current year: Elements of cost: Per unit) Raw material 40.00 Direct labour 15.00 Overhead 30.00 Total cost 85.00 Profit 15.00 Sales 100.00 Other information: Raw material in stock: average 4 weeks consumption, Work - in progress (completion stage, 50 per cent), on an average half a month. Finished goods in stock: on an average, one month. Credit allowed by suppliers is one month. Credit allowed to debtors is two months. Average time lag in payment of wages is 142 weeks and 4 weeks in overhead expenses. Cash in hand and at bank is desired to be maintained at 350,000. All Sales are on credit basis only. Required: Prepare statement showing estimate of working capital needed to finance an activity level of 96,000 units of production. Assume that production is carried on evenly throughout the year, and wages and overhead accrue similarly. For the calculation purpose 4 weeks may be taken as equivalent to a month and 52 weeks in a yearStep by Step Solution
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