You are required to prepare a statement showing the working capital needed to finance, a level of activity of 2,40,000 units of production. You may assume that production is carried on evenly throughout the year; wages and overhead accrue similarly and a time period of 4 weeks is equivalent to a month. Note: Year = 4x 12 = 48 weeks Statement of Working Capital Particulars Rs. Rs. Current Assets Stock of raw materials (4 weeks) 2,40,000 x 18 28,00,000 = 7,00,000 x 4 1) Work in process (2 weeks) Raw materials 7,00,000 x 2 14,00.000 Direct labour 2.40,000 3,00,000 x 2 6,00,000 Overheads 2,40,000 x 7,00.000 350000 x 2 27,00.000 (i) Stock of finished good (4 weeks) Raw Materials 7.00.000x 4 28,00,000 Direct Labour 30.000 x 4 1.20,000 Overheads 3,50,000 x 4 14,00,000 54,00.000 (iv) Sundry Debtors (8 weeks) Raw Materials 7,00,000 x 8 x 3 42,00,000 Direct Labour 3,00,000 x 8x 18,00,000 Overheads 3,50,000 x 8x + 21,00,000 81,00,000 Cash in hand and t Bank 50,000 1,90,50.000 (-) Current Liabilities 0 Sundry creditors (4 weeks) 7,00,000 x 4 28,00.000 (1) Wages Outstanding (14 weeks) 3,00,000 ** 4,50,000 (1) Lag in payment of overhead (4 weeks) 3,50,000 x 4 14,00.000 46,50.000 Net Working Capital required 1,44,00,000 Exercise 10 Mr. Siva wishes to commerce a new trading business and gives the following informations. (i) The total estimated sales in a year will be Rs, 20,00,000. (ii) His expenses are estimated fixed Expenses of Rs. 3,000 per month plus variable expenses equal to 10% of his turnover. (iii) He expects to fix a sales price for each product which will be 33% in excess of his cost of purchase. t14 (IV) He expects to turnover his stock six times in a year (v) The sales and purchases will be evenly spread throughout the year. All sales will be for cash but he expects one month's credit for purchases, Calculate (i) His estimated profit for the year, (ii) His average working capital requirements