PC Ltd. Sells its product on a gross profit of 20% on sales

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Presentation transcript:

PC Ltd. Sells its product on a gross profit of 20% on sales PC Ltd. Sells its product on a gross profit of 20% on sales. The following information is extracted from its annual accounts for the year ended 31st December 2012. Particulars RS. Sales at 3 months credit 40,00,000 Raw material 12,00,000 Wages paid –avg. time lag 15 days 9,60,000 Manufacturing expenses paid-1 month in arrears Administrative exp. Paid-1 month in arrears 4,80,000 Sales Promotion exp. –payable half yearly in advance 2,00,000 The company enjoy 1 month credit from suppliers of RM and maintains 2 months stock of RM & 1 ½ months finished goods. Cash balance is maintained at Rs.1,00,000 as a precautionary balance. Assuming a 10% margin, Find out the wc requirements

The company enjoy 1 month credit from suppliers of RM and maintains 2 months stock of RM & 1 ½ months finished goods. Cash balance is maintained at Rs.1,00,000 as a precautionary balance. Assuming a 10% margin, Find out the wc requirements .

Current Assets Stock of RM (12,00,000*2/12) 2,00,000 Stock of Finished goods (40,00,000*80/100*1,5/12) 4,00,000

Statement of Working capital requirements Current Assets Stock of RM (12,00,000*2/12) Stock of Finished goods (40,00,000*80/100*1.5/12) Debtor at cost (40,00,000*80/100*3/12) Advance payment of sales promotion (2,00,000*6/12) Cash Total CA

Statement of Working capital requirements Current Liabilities Creditors Wages outstanding Manufacturing exp. outstanding Admin. Exp. outstanding NWC

Statement of Working capital requirements Current Assets Stock of RM (12,00,000*2/12) 2,00,000 Stock of Finished goods (40,00,000*80/100*1.5/12) 4,00,000 Debtor at cost (40,00,000*80/100*3/12) 8.00,000 Advance payment of sales promotion (2,00,000*6/12) 1,00,000 Cash Total CA 16,00,000

Statement of Working capital requirements Current Liabilities Creditors (12,00,000*1/12) 1,00,000 Wages outstanding (9,60,000*.5/12) 40,000 Manufacturing exp. outstanding Admin. Exp. outstanding (4,80,000*1/12) Total Current liabilities 2,80,000 NWC CA-CL (16,00,000-2,80,000) 13,20,000 Contingencies (13,20,000*10/100) 1,32,000 WC Required 14,52,000