Question: While preparing a project report on behalf of a client, the following information pertaining to Client (JK Ltd.)is collected. You are required to estimate the

While preparing a project report on behalf of a client, the following information pertaining to Client (JK Ltd.)is collected. You are required to estimate the net working capital. Add 10%to the computed figure to allow for contingencies.

Cost per unit in Rs.

Raw Material 160

Direct Labour 60

Overheads 120

Total Cost 340

Additional information:-

Selling Price Rs. 400 per unit

Level of Activity 2,10,000 units per annum

Raw Material in stock Average 4 weeks

Works in Process Average 2 weeks

(Assume 50% completion stage in respect of conversion costs ( Labour and Overheads) and 100 % completion in respect of materials)

Finished goods in stock Average 4 weeks

Credit allowed by suppliers Average 4 weeks

Credit allowed to debtors Average 8 weeks

Lag in payment of Wages Average 1.5weeks

Cash at bank is expected to be Rs. 80,000

Assume that production is carried out on evenly throughout during the 52 weeks of the year and wages accrue similarly. All sales are on Credit basis only.

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