Q.1.

From the following data, compute the duration of the operating cycle for each of the two years and comment on the increasing/decrease:

stocks: raw materials work in progress finished goods

year 1 Rs.20000 14000 21000

year 2 Rs.27000 18000 24000

purchase of raw material cost of goods sold sales debtors creditors

96000 140000 160000 32000 16000

135000 180000 200000 50000 18000

Assume 360 days per year for computations purposes .

Q.2 .From the following data, extracted from the books of a manufacturing company, compute the operating cycle in days:
Period covered:365 days average period of credit allowed by suppliers,16 days other data are as follows: (Rs.000) average debtors (outstanding) 480 raw material consumption 4400 total production cost 10000 total cost of sales 10500 sales for the year 16000

Value of average stock maintained: Raw material work in progress finished goods

320 350 260

Q.3 You are supplied with the following information in respect of XYZ Ltd for the ensuing year: Production of the year 69000units Finished goods in store 3 months Raw material in store 2 months consumption Production process 1 month Credit allowed by creditors 2 month Credit given to debtors 3 month Selling price per unit Rs.50 Raw material, 50% of selling price Direct wages, 10 %of selling price Manufacturing and administrative overheads,16% of selling price Selling overheads, 4% of selling price.

There is a regular production and sales cycle and wages overheads accrue evenly. Wages are paid in the next month of accrual.
Material is introduced in the beginning of the production cycle. You are required to ascertain its working capital requirement.

X ltd. Sells goods at a gross profit of 20%.It includes depreciation as a part of cost of production. The following figures for the 12 month period ending March 31,current year are given to enable you to ascertain the requirements of working capital of the company on a cash cost basis.

In your working, you are required to assume that: 1) 2) 3) 4) 5) 6) A safety margin of 15% will be maintained. Cash is to be held to the extent of 50% of current liabilities. There will be no work-in-progress Tax is to be ignored. Finished goods are to be valued at manufacturing costs. Stocks of raw materials and finished goods are kept at one months requirements.

Sales at 2 months credit,Rs.27,00,000

Material consumed(suppliers credit is for 2 months),Rs.6,75,000 Wages(paid on the last day of the month),Rs.5,40,000 Manufacturing expenses outstanding at the end of the year(cash expenses are paid one month in arrear),Rs.60,000 Total administrative expenses(paid as above),Rs.180,000 Sales promotion expenses(paid quarterly in advance),Rs.90,000

Q.5 On April 1 of the current year, the board of directors of Dowell ltd wishes to know the amount of working capital that will be required to meet the programmed of activity they have planned for the year. The following information is available:

1) 2) 3)
4) 5)

6)

Issued and paid up capital,Rs.2,00,000. 5% debentures(secured on assets),Rs. 50,000. Fixed assets valued at Rs.1,25,000 on March 31 of the previous year. Production during the previous year was 60,000 units; it is planned that this level of activity should be maintained during the present year. The expected ratios of cost to selling price areraw material 60% direct wages 10% overheads 20% Raw materials are expected to remain in store for an average of two months before these are issued for production.

7). Each unit of production is expected to be in process for one month. Full unit of raw materials is required in the beginning of production. 8).finished goods will stay in warehouse for approimately 3 months. 9). Creditors allow credit for 2 months from the date of delivery of raw material. 10).credit allowed to debtors is 3 months from the date of dispatch. 11).selling price per unit is Rs.5. 12).there is a regular production and sales cycle. Prepare: working capital requirement forecast.

Strong cement company ltd has an installed capacity of producing 1.25 lakhs tones of cement per annum;its present capacity utilization is 80%.The major raw material to manufacture cement is limestone which is obtained from the companys own mechanized mine located near the plant. The company produces cement produces cement in 200 kgs bags. From the information given below, determine the net working capital (NWC) requirement of the company for the currenyear.

Cost structure per bag of cement (estimated)

Gypsum Limestone Coal Packing material Direct labor Factory overheads(including depreciation of Rs.10) Administrative overheads Selling overheads Total cost profit margin selling price add: sale tax(10% of selling price) invoice price to consumers Rs.25 15 30 10 50 30 20 25 205 45 250 25 275

Additional information 1) Desired holding period of raw materials: Gypsum 3 months Limestone 1 months Coal 2.5 months Packing material 1.5 months 2) The product is in process for a period of 0.5 month(assume full units of materials, namely Gypsum Limestone and Coal are required in the beginning; other conversion costs are to be taken at 50%) 3) Finished goods are in stock for a period of 1 month before they are sold. 4) Debtors are extended credit for a period 3 months.

5).average time lag in payment of wages is approximately 0.5 month and overheads,1 month.

6).average time lag in payment of sales tax is 1.5 months.

7).the credit period extended by various suppliers are: Gypsum 2 month Coal 1 month Packing material 0.5 month 8)minimum desired cash balance is Rs.25 lakh you may state your assumption, if any.