L. The following elements of cost relate to a product by Jaspal Bhatti & Company. (All...

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L. The following elements of cost relate to a product by Jaspal Bhatti & Company. (All figures in Rupees per unit). Raw Material 100 Labour Cost 80 Overheads 40 Selling Price 250 The company has a practice of storing raw materials required for 2 weeks. The process of manufacturing is such that the amount of money blocked up in the form of work in progress is negligible. Bhatti & Co. wants to stock finished goods required for 6 weeks. 20% of the production is sold on cash basis and the remaining on credit basis with a collection period of one month. The raw material suppliers offer a credit period of 3 weeks. There is a lag of one week in payment of wages and 2 weeks in case of overheads. The company wants to maintain a minimum cash balance of Rs.12,500 at any point in time. Bhatti & Co. is planning to produce and sell 144,000 units of the product during next year. Estimate the working capital requirements forthe unit. (Hint: While computing the investment in Debtors, consider only 80% of weekly sales, because 20% of sales is on cash basis.) L. The following elements of cost relate to a product by Jaspal Bhatti & Company. (All figures in Rupees per unit). Raw Material 100 Labour Cost 80 Overheads 40 Selling Price 250 The company has a practice of storing raw materials required for 2 weeks. The process of manufacturing is such that the amount of money blocked up in the form of work in progress is negligible. Bhatti & Co. wants to stock finished goods required for 6 weeks. 20% of the production is sold on cash basis and the remaining on credit basis with a collection period of one month. The raw material suppliers offer a credit period of 3 weeks. There is a lag of one week in payment of wages and 2 weeks in case of overheads. The company wants to maintain a minimum cash balance of Rs.12,500 at any point in time. Bhatti & Co. is planning to produce and sell 144,000 units of the product during next year. Estimate the working capital requirements forthe unit. (Hint: While computing the investment in Debtors, consider only 80% of weekly sales, because 20% of sales is on cash basis.)

Answer rating: 100% (QA)

Production per week Required annual production 52 weeks 144000 units 52 weeks 2769 units Raw Materia... View the full answer