Position) Current Assets : Amount Current Assets Amount 1.29.600 Raw Materials (Given) Work in process (Given) (2000x22) Finished Goods Given 83.200 2,77,200 3,69,600 Debtors at cost (4,00032) Total Current Assets 72,000 Raw Material (4,000*3* 10.80) 44,000 Work in process (4,000*20.80) 1,44,000 Finished Goods (4,000x2.25*30.80) 1,92,000 Debtors at cost (4,000x33080) 4,52,000 Total Current Assets Loss Current Liabilities: 48,000 Creditors (4,000x10.802) 20,000 Wages & Expenses (4,000*20*%) 3.84,000 Working Capital Requirement 8,59,600 86,400 Less Current Liabilities: Creditors (2,000x12x2) Wages & Expenses (2,000x20x%) Working Capital Requirement 40.000 7,33,200 So, the Working Capital requirement will increase by (Rs. 7,33,200-3,84,000) = Rs. 3,49,200 due to change from single shift to double shift operations. u 17 Illustration 14 XYZ Co. Ltd. is a Pipe manufacturing company. Its production cycle indicates that materials, are introduced in the beginning of the production cycle, wages and overhead accrue evenly throughout the period of the cycle. Wages are paid in the next month following the month of accrual. Work in progress includes full units of raw materials used in the beginning of the process and 50% of wages and overheads are supposed to be conversion costs. Details of production process and the components of working capital are as follows: Production of pipes Duration of the production cycle Raw materials inventory held Finished goods inventory held for Credit allowed by creditors Cost price of raw materials Direct wages Overheads Selling price of finished pipes 12,00,000 units One Month One Month Consumption Two Months One MOths Rs. 60 per Unit Rs. 10 per Unit Rs. 20 per Unit Rs. 100 per Unit Required to calculate: 1) The amount of working capital required for the company. 1) Its maximum permissible bank finance under all the three methods of lending norms as suggested by the Tandon Committee, assuming the value of core current assets: Rs. 1,00,00,000