Q256

From the following information, prepare a statement showing the average amount of working capital required by Solvent Ltd. taking 360 days in a year. Actual sales are estimated at 5,00,000 units at $ 2 p.u. Production quantities coincide with sales and will be carried on evenly throughout the year and the production cost will be as follows: Materials Labour $ 1 per unit $ 0.40 per unit $ 0.35 per unit Overheads Consumers are given 45 days' credit and 60 days' credit is allowed by raw material suppliers, 36 days' supply of raw materials and 15 days' supply of finished goods are kept in the reserve. Production cycle is 18 days and all material is issued at the commencement of each production cycle. A cash balance equivalent to one-third of the average of other working capital requirement is kept for contingencies