Quiz

Maple Leaf Company Limited has a capacity to produce 125,000 tons of cement per year. Currently company is utilizing 80% of its total capacity. Limestone is a major raw material which obtained from the companys own mine located near the plant. MLCF produces cement in 200 kgs bags. Additional information is given below:

Cost structure per bag of cement (estimated)

Packing Material	Rs. 10
Coal	30
Limestone	15
Gypsum	25
Direct Labour	50
Factory overhead including depreciation of Rs.10	30
Administrative overheads	20
Selling overheads	25
Total cost	205
Profit margin	45
Selling price	250
Add Sales tax	25
Invoice price to consumer	275

• Finished goods are in stock for a period of 1 month before they are sold.
• Holding period of raw material Gypsum, 3 months, Limestone 1 month, Coal 2.5 months and packing material 1.5 months
• Credit period extended to debtors is 3 months.
• Average payment period of wages is approximately 0.5 month and of overheads, 1 months.
• Average time in payment of sales tax is 1.5 months.
• Suppliers extend credit period: Gypsum 2 months, Coal 1 month, and Packing material 0.5 month.
• Desired cash balance is Rs.2.50 million.

Required

Calculate working capital requirement of the company.