Professional Documents
Culture Documents
You are required to prepare a statement showing the working capital required to finance the level
of activity of 55,000 units per year from the following information:
Price per unit
Raw materials 12
Direct labour 3
Overheads 9
Total cost 24
Profit 6
Selling price 30
2. You are required to prepare a statement showing the working capital required to finance the level
of activity of 85,000 units per year from the following information:
Total cost 48
Profit 12
Selling price 60
1) Raw materials are in stock on an average for two and half months
2) Materials are in process on an average for half a month
3) Finished goods are in stock on an average for two and half months
4) Credit allowed by creditors is two months of raw materials supplied
5) Credit allowed to debtors is three months
6) Lag in payment of wages is half a month
7) Cash on hand and at bank expected to be Rs. 27,000/-
3. Prepare an estimate of net working capital requirement for WCM Ltd. adding 10% for
contingencies from the following information.
Estimated cost per unit of production Rs 170/- includes raw materials Rs.80, direct labour Rs.30
and overheads Rs.60. Selling price is Rs.200/- per unit. Level of activity per annum is 1, 04,000
units.
Raw material in stock : average 4 weeks; work in progress (assume 50 % completion stage);
average 2 weeks; finished goods in stock average 4 weeks; credit allowed by the suppliers average
4 weeks; credit allowed to debtors average 8 weeks; lag in payment of wages average 1.5 weeks
and cash at bank is expected to be Rs.25000.
You may assume that production is carried on evenly throughout the year (52 weeks) and wages
and overheads accrue similarly. All sales are on credit basis only. You may state your assumption,
if any.
4. You are required to prepare a statement showing the working capital required to finance the level
of activity of 18,000 units per year from the following information:
You are informed that all activities are evenly spread out during the year.
5. You are required to prepare a statement showing the working capital required to finance the level
of activity of 65,000 units per year from the following information:
Price per unit
Raw materials 25
Direct labour 14
Overheads 11
Total cost 50
Profit 10
Selling price 60
1) Raw materials are in stock on an average for one and half month
2) Materials are in process in an average for half a month
3) Finished goods are in stock on an average for 2 months
4) Credit allowed by creditors is one and half months of raw materials supplied.
5) Credit allowed to debtors is three months.
6) Lag in payment of wages is half a month.
7) Cash on hand and at bank expected to be Rs. 60,000.
6. From the following information, prepare statement showing the average amount of working capital
required by the company.
a) The annual sales are estimated at 12,000 units @ Rs. 10 per unit.
b) The production and sales cycle is even throughout the year
c) The production cost is:
Material Rs.5.00
Labour Rs.2.00
Expenses Rs.1.75
Rs. 8.75
d) Customers are given two months credit and suppliers give 3 months credit
e) 45 days of supply of raw materials and 15 days of supply of finished products are stored
f) The production cycle is 15 days
g) A cash balance equal to 20% of the working capital requirement is kept for contingencies
7. M.P industries desires to estimate working capital requirements for 2016-17 when expected annual
output is Rs. 1,30,000 units
The sales price is Rs. 250. The proportion of cost is - material – 40%, wages-20%,
overheads-12% and margin – 28%.
The other data:
1) Cash transactions are 25% for sales and 20% for purchases
2) The stock holding of materials and finished goods equals 4 weeks
3) Processing time is 2 weeks
4) Credit allowed and enjoyed is 4 weeks
5) Time lag for wages is 2 weeks and overheads is 3 weeks
You are required to prepare a statement showing the working capital needed to finance a
level of activity of 1,30, 000 units of production. You may assume that production is carried
on evenly throughout the year and wages and overheads accrue similarly. For calculation
purposes, 4 weeks may be taken as equivalent to a month.
9. While preparing a project report on behalf of a client you have collected the following facts.
Estimate the net working capital required for that project. Add 10% to your computed figure to
allow contingencies
Particulars amount per unit
Estimated cost per unit of production:
Raw material 120
Direct labour 70
Overheads (exclusive of depreciation, Rs.10 per unit) 50
Additional information:
Selling price Rs. 280 per unit
Level of activity 1, 25,000 units of production per annum
Raw materials in stock average of 6 weeks
Work in progress (WIP) - assume 50% completion stage in respect of conversion
costs and 100 % completion in res. Of materials, average 2.5 weeks
Finished goods in stock average 5 weeks
Credit allowed by suppliers average 4 weeks
Credit allowed to debtors average 6 wks
Lag in payment of wages average 1.5 wks
Cash a bank is expected to be Rs. 32,000
You may assume that production is carried on evenly throughout the year (52 wks) and
wages and overheads accrue similarly. All sales are on credits basis only.