The Board of Directors of Nanak Engineering Company Private Ltd. requests you to prepare a statement...

 

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The Board of Directors of Nanak Engineering Company Private Ltd. requests you to prepare a statement showing the Working Capital Requirements for a level of activity of 1,56,000 units of production. The following information is available for your calculations : Per unit (a) Raw materials 90 Direct labour 40 Overheads 75 205 Profit 60 Selling price per unit 265 (b) (i) Raw materials are in stock, on average one month. (ii) Materials are in process, on average 2 weeks. (iii) Finished goods are in stock, on average one month. (iv) Credit allowed by suppliers, one month. (v) Time lag in payment from debtors, 2 months. (vi) Lag in payment of wages, 1% weeks. (vii) Lag in payment of overheads is one month. 20% of the output is sold against cash. Cash in hand and at bank is expected to be ? 60,000. It is to be assumed that production is carried on evenly throughout the year, wages and overheads accrue similarly and a time period of 4 weeks is equivalent to a month. The Board of Directors of Nanak Engineering Company Private Ltd. requests you to prepare a statement showing the Working Capital Requirements for a level of activity of 1,56,000 units of production. The following information is available for your calculations : Per unit (a) Raw materials 90 Direct labour 40 Overheads 75 205 Profit 60 Selling price per unit 265 (b) (i) Raw materials are in stock, on average one month. (ii) Materials are in process, on average 2 weeks. (iii) Finished goods are in stock, on average one month. (iv) Credit allowed by suppliers, one month. (v) Time lag in payment from debtors, 2 months. (vi) Lag in payment of wages, 1% weeks. (vii) Lag in payment of overheads is one month. 20% of the output is sold against cash. Cash in hand and at bank is expected to be ? 60,000. It is to be assumed that production is carried on evenly throughout the year, wages and overheads accrue similarly and a time period of 4 weeks is equivalent to a month.

Answer rating: 100% (QA)

Step 1 Calculation of Stock of Raw material Work in process and Finished goods Annual output 156000 ... View the full answer