Question: The board of directors of Sugandha mills limited request you to prepare a statement showing the working capital requirements for a level of activity of

The board of directors of Sugandha mills limited request you to prepare a statement showing the working capital requirements for a level of activity of 30,000 units of output for the year.

The cost structure for the companys product for the above-mentioned activity level is given below.

	Cost per Unit (Rs.)
Raw materials	20
Direct labour	5
Overheads	15
Total	40
Profit	10
Selling price	50

(a) Past experience indicates that raw materials are held in stock, on an average for2 months.

(b) Work in progress (100% complete in regard to materials and 50% for labour and over heads) will be half a months production.

(c) Finished goods are in stock on an average for 1 month.

(d) Credit allowed to suppliers: 1 month.

(e) Credit allowed to debtors: 2 months.

(f) A minimum cash balance of Rs 25,000 is expected to be maintained.

Prepare a statement of working capital requirements.

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