Calculate the amount of working capital requirement for XYZ Ltd.

from the following information

Raw Materials are held in stock on an average for two month. Materials are in process on an average for a – month.Finished g
an average for one month.

Credit allowed by suppliers is one month and credit allowed to debtors is two months. Time lag in payment of wages is 3 wee
payment of overheads expenses is two month. One third of the sales are made on cash basis.
Cash in hand and at the bank is expected to be Rs. 300,000;expected level of production amount to 395,200 units for a year o

You may assume that production is carried on evenly throughout the year and a time period of four weeks is equivalent of a m

Raw Material
Direct Labour
Overheads
Total cost
Profit
Selling Price
Rs./Unit
200
70
120
340
60
400
 Rs./Unit
Raw Material/ Creditors 160 * Raw Material
Direct Labour / wages 60 * Direct Labour
Overheads 120 Overheads
Debtors/Finished Goods /Total cost 340 * Total cost
Profit 60 Profit
Selling Price 400 Selling Price

Raw Material 1 month

W.I.P 1/2 month
Finished Goods 1 month
Creditors 1 month
Debtors 2 months Note: 1/4 on cash basis, while 3/4 for debtors
Outstanding wages 1.5 weeks
Outstanding overheads 1 months

1 year 104000 units 52 weeks

1 month 4 weeks

Production of units in one week 4807.692308 ***

Rule Cost
W.I.P Raw Material 100% 160
Labour 50% 30
O. Heads 50% 60
W.I.P 250
 Net working Capital =
Solution:
200 Current Assets:
80 1 Raw Material
130 2 W.I.P
410 3 Finished goods
150 4 Debtors
560 5 Cash Balance

Current Liabilities:
1 Creditors
2 Outstanding wages
3 Outstanding overheads

504000
52 395200
7600 7600
Current Assets - Current Liabilities

2000units*4weeks*Rs.160 1,280,000
2000units*2weeks*Rs.250 1,000,000
2000units*4weeks*Rs.340 2,720,000
2000units*8weeks*0.75*Rs. 340 4,080,000
50,000
Total Current Assets 9,130,000

2000units*4weeks*Rs.160 1,280,000
2000units*1.5weeks*Rs.60 180,000
2000units*4weeks*Rs.120 960,000
Total Current Liabilities 2,420,000

Net working Capital 6,710,000