Q5.

5. (i) ABC Ltd. estimates demand for 5000 units of material during the next year. The costs associated with requisitioning the order, transportation, receiving of order and inspection are Rs. 200 per order. Storing cost is Rs. 30 per unit and cost of material handling and insurance is Rs. 20 per unit. ABC Ltd. has a policy of maintaining 20 percent of EOQ as safety stock. The daily usage of material is 30 units and lead time is 5 days. Determine units of EOQ, safety stock, and reorder point. (5) (5) 4 Page () Your client has requested you to estimate net working capital required for his projeet on the basis of data given below Estimated cost per unit of production: (Rs.) Raw Material 45 Direct Labour 15 Overheads (inclusive of depreciation Rs. 10) 40 Selling & Distribution 20 Total 120 The following information is also available: (1) It is proposed to maintain a level of activity of 1.04,000 units per annum. (1) Selling price is Rs. 135 per unit. (iii) Raw materials are expected to remain in stores for an average period of 4 weeks. (iv) Work-in-progress (assume 50% completion stage) are expected to remain in stores for an average period of 2 weeks. Assume raw material is completely fed into the production process at the beginning of the period. (v) Finished goods are required to be in stock on an average period of 4 weeks. (vi) 75% of total sales are credit sales. (vii) Average credit allowed to debtors is 2 weeks. (viii) Average credit allowed by suppliers is 3 weeks. (ix) Lag in payment of wages average 1% weeks. (x) Lag in payment of overheads average 2 weeks. (xi) The company wishes to have a desired cash balance of Rs. 1.20,000. (xii) 10 per cent of net working capital is required to be maintained for contingencies. 5 Page 5