2. The cost accountant provided with the following information about production, cost, and other related issues of a company. As the financial manager of the company you are required to calculate the working capital requirement:
Annual Production------------52000 Unit
Raw material cost per unit----80 Tk
Direct labor cost per unit-----20 Tk
Overhead cost per unit-------60 Tk
Total Cost per unit ------- 160 Tk
Profit per unit----------------40 Tk
Selling price per unit---------200 Tk
Other information :
a) Direct raw materials are in stock on an average for one month and in the process on average half month.
b) Finished goods are in stock on average for six weeks.
c) Credit allowed by creditors is one month and to debtors is two months.
d) Lag in payment of wages 2 weeks.
e) Cash in hand and at bank is expected to be Tk. 720000
Solution : Determination of working capital requirement
Raw material cost per unit----80 Tk
Direct labor cost per unit-----20 Tk
Overhead cost per unit-------60 Tk
Total Cost per unit ------- 160 Tk
Profit per unit----------------40 Tk
Selling price per unit---------200 Tk
Other information :
a) Direct raw materials are in stock on an average for one month and in the process on average half month.
b) Finished goods are in stock on average for six weeks.
c) Credit allowed by creditors is one month and to debtors is two months.
d) Lag in payment of wages 2 weeks.
e) Cash in hand and at bank is expected to be Tk. 720000
Solution : Determination of working capital requirement
Particular | Taka | Taka | |
1)Row materials =(52000*30*80)/360 2)Work in process =(52000*160*15)/360 3)Finish goods =(52000*45*160)/360 Total investment in inventory(1+2+3)
1) Creditors =(52000*80*30)/360 2) wages =(52000*20*15)/360 Total Current Liabilities (1+2) Net Working Capital (D-E) | 346667 346667 1040000 | 173334 1386667 72000 | |
346667 43333 | |||
2280001 390000 | |||
1890001 | |||
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