Professional Documents
Culture Documents
HOMEWORK NO 4
PART A
Qns.3 You are supplied with the following information in respect of XYZ Ltd
for the ensuing year:
Production of the year , 69,000 units
Finished goods in store, 3 months
Raw material in store, 2 months’ consumption
Production process, 1 month
Credit allowed by creditors, 2 months
Credit given to debtors, 3 months
Selling price per unit, Rs 50
Raw material, 50 per cent of selling price
Direct wages, 10 per cent of selling price
Manufacturing and administrative overheads, 16 per cent of selling
price
Selling overheads, 4 per cent of selling price
There is a regular production and sales cycle and wages overheads accrue
evenly. Wages are paid in the next month of accrual. Material is introduced
in the beginning of the production cycle. You are required to ascertain its
working capital requirement..
Qns.5 ABC co wants you to advice them in average working capital required
in first year of working:-
You are given following estimates and are instructed to add 10% to your
computed figure to allow for contingencies :-
1. Amount blocked up for stocks:-
Stocks of finished product 5,000
Stock of stores, materials etc 8,000
2. Average credit given:-
Inland sales- 6 weeks credit 3,12,000
Export- 1 ½ weeks 78,000
3. Lag in payment of wages and
other outgoings:
Wages- 1 ½ weeks 2,60,000
Stock of materials- 1 ½ months 48,000
Rent, royalties- 6 months 10,000
Clerical staff= ½ month 62,400
Manager= ½ month 4,800
Miscellaneous expenses- 1 ½ 48,000
month
4. Payment in advance:
Sundry expenses (paid 8,000
quarterly in advance)
5. Undrawn profit on the average 11,000
throughout the year
Set up your calculations
Qns.6 From the following estimate requirement for net working capital
Raw material 400
Direct labour 150
Overheads (excluding depreciation) 300
Total cost 850
Other information:-
Selling price Rs.1,000 per unit
Output 52,000 units per annum
Raw material in stock Average 4 weeks
Work in process:- (assume 50%
completion stage with full material Average 2 weeks
consumption)
Finished goods in stock Average 4 weeks
Credit allowed by suppliers Average 4 weeks
Credit allowed to debtors Average 8 weeks
Cash at bank expected to be Rs.50,000
Assume production is sustained at an even pace during 52 weeks. All sales
are on credit basis