The following data relate to Nkabi (Pty) Ltd, a manufacturing company. 

Sales revenue for the year: R1 500 000 

Costs as percentage of sales: 

Direct materials 30% 

Direct labour 25% 

Variable overheads 10% 

Fixed overheads 15% 

Selling and distribution 5%

 Average statistics relating to working capital are as follows: 

▪ receivables take 2 ½ months to pay 

▪ raw materials are in inventory for three months 

▪ WIP represents two months’ half-produced goods 

▪ finished goods represent one month’s production 

▪ credit is taken – Materials 2 months 

– Direct labour 1 week 

– Variable overheads 1 month 

– Fixed overheads 1 month 

– Selling and distribution ½ month WIP and finished goods are valued at the cost of material, labour and variable expenses. 

Estimate the working capital requirement of Nkabi (Pty) Ltd assuming that the labour force is paid for 50 working weeks in each year.

Answer rating: 100% (QA)

To estimate the working capital requirement of Nkabi Pty Ltd we can use the following formula Working capital requirement Current assets Current liabi... View the full answer