In company XYZ Ltd, production expected during the year is 5.5 lac units @ Selling Price Rs.8.5 per unit. The expected ratios of cost to selling price are:

Raw materials 40%

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 2 months from the date of dispatch. All sales are assumed to be credit sales.

Prepare a statement of Working Capital

Answer rating: 100% (QA)

To prepare a statement of working capital for company XYZ Ltd we will need to calculate the followin... View the full answer