Production during the year expected is 1 lac units @ Selling Price Rs.6 per unit

Question

Production during the year expected is 1 lac units @ Selling Price Rs.6 per unit
The expected ratios of cost to selling price are:
Raw materials 50%
Direct Wages 10%
Overheads 25%
The raw materials ordinarily remain in stores for 2 months before production. Every unit of production
remains in process for 2 months (i.e. for WIP take 2 months of Raw Materials and average of 1 month of processing done). Finished goods remain in the warehouse for 4 months. Credit allowed by creditors is 3 months from the date of delivery of raw materials and credit given to debtors is 3 months from the date of dispatch. All sales are assumed to be credit sales.
Prepare a statement of Working Capital

Explanation / Answer

STATEMENT SHOWING WORKING CAPITAL REQUIREMENTS FOR 100,000 UNITS OF PRODUCTION

Particulars Basis of calculation Amount Amount Raw materials 100,000 Units * 3 * 2/12 50000 WIP - Material 100,000 Units * 3 * 2/12 50000 Conversion 100,000 Units * 2.10 * 1/12 17500 67500 Finished goods 100,000 Units * 5.10*4/12 170000 Debtors 100,000 Units * 6 * 3/12 150000 Total current assets (CA) 437500 Current liabilities Creditors 100000 * 3 * 3/12 75000 Total current liabilities (CL) 75000 Working capital = CA - CL 362500

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.