Quiz 1.

0 Brush Co

For a manufacturing business, the working capital cycle will be measured by:

Raw material
Raw materials =
Credit purchases
=(82,000/378,000)*365
Work-in-progress
Work-in-progress =
Cost of sales x degree of completion
=((58,000/(378,000+240,000+215,000+185,000))*)70%)*365
Finished goods
Finished goods =
Cost of sales
=(210,000/(378,000+240,000+215,000+185,000))*365
Trade receivables
Trade receivables =
Credit sales
=(356,000/1,500,000)*365
Payables payment period:

Trade payables
Raw materials =
Raw materials costs
=(45,000/378,000) * 365
Trade payables
Overheads =
Variable/fixed overheads
=(75,000/(215,000+185,000))*365
Trade payables
Labour =
Direct labours costs
=(9,000)/240,000) * 365
WORKING CAPITAL CYCLE
Working 1: Cost of sales
Raw material costs
Direct labour
Variable production overheads
Apportioned fixed production overheads
 Solution
Payable
x 365

79 days

x 365

30 days

x 365

75 days

x 365

87 days

x 365

43.45 days

x 365

68.44 days

x 365

13.69 days
145 days

378000
240000
215000
185000
1018000
 ADD SOLUTION OR THE POSSIBLE CAUSES

Problem
can charge interest on top of the payments and damage the relationships with the suppliers.
QUIZ 1.1

For a manufacturing business, the working capital cycle will be measured by:

CURREN ASSETS

1) Raw materials = Raw material

Credit purchases
5 weeks =(Raw material/100000+50000)*52
2) Work-in-progress = Work-in-progress
Cost of sales x degree of completion
Frame WIP 2 weeks = (X/(100,000*100%)*52
Plastic Lenses WIP 2 weeks = (X/(50,000*50%)*52
Labor and Var OH WIP 2 weeks = (X/((37,500+31,250)*40%)*52

3) Finished goods = Finished goods

Cost of sales
-
4) Trade receivables = Trade receivables
Credit sales
8 weeks =(X/250,000)*52

CURREN ASSETS

CURRENT LIABILITIES

Raw materials = Trade payables

Raw materials costs
Frame costs 3 = (X/(100000)*52
Plastic Lenses costs 7 = (X/50000)*52

Overheads = Trade payables

Variable/fixed overheads
Labor and Var OH cost 4 weeks = (X/((37,500+31,250))*52

Labour = Trade payables

Direct labours costs
CURRENT LIABILITIES

WORKING CAPITAL
measured by:

x 365

=> Raw material = 14,423

x 365

=> Frame WIP = 3,847

=> Plastic Lenses WIP = 962
=> Labor and Var OH WIP = 1058
=> WIP= 5,867

x 365

x 365

=> Trade recieveables = 38,462

58,752

x 365

=> Frame costs = 5,769

=> Plastic Lenses costs = 6,731

x 365

=> Labor and Var OH costs = 5,288

x 365
17,788

40,964
Quiz 1.1

WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES

CURRENTS ASSETS:

Raw material
Raw materials holding period =
Credit purchases
=((2,500,000*10%)/(2,500,000*30%))*52

Work-in-progress
Work-in-progress holding period =
Cost of sales x degree of completion
=((2,500,000*10%)/(2,500,000*30%))*52

Finished goods
Finished goods holding period =
Cost of sales
=((2,500,000*10%)/(2,500,000*30%))*52

Trade receivables
Trade receivables collection period =
Credit sales

Less CURRENT LIABILITIES:

Trade payables
Payables payment period =
Raw materials costs
TIES

x 52

17.3333333

x 52

x 52

x 52

x 52