Question

Problem: 1: Find out working capital by operating cycle method, taking 360 days in a year. Sales: Material cost 9,000 units @ $100 each Same is produce and save is selling Labor cost S 50 per unit. S25 per unit Overheads $15 per unit Customers are given 45 days credit and 50 days credit taken from suppliers. Raw materia for 30 days and finished goods for 15 days are kept in stock. Production cycle period is 25 days. Problem: 2: Find out working capital by operating cycle method, taking 360 days in a year Sales: 50,000 units @ $20 each Material cost S 10 per unit. Labor cost $4 per unit Overheads $3.5 per unit Customers are given 45 days credit and 60 days credit taken from suppliers. Raw material for 36 days and finished goods for 15 days are kept in stock. Production cycle period is 18 days. Forecasting of current assets and current liabilities: Problem: 1: Determine the working capital from the following data given below: 1. Production is estimated to be 6,000 units. 2. Cost of the production: Materials 40% Labor 30% Overheads 10% 3. Materials are expected to be remain in the stores for an average one month. 4. Finished goods are likely to be remain in the warehouse for an average two months. 5. Each unit of production should be take average half of the month. 6. 50% sale will be on credit. Customers are allowed two months credit. 7. Credit allowed to suppliers of materials is one month. 8. Lag in payment to wages is one month. 50% overheads consists of salaries to non- production staff 9. Selling price of per unit will be $ 200. 10. Add 20% for contingencies.

Answer 1

1.
Operating Cycle = Accounts Receivable period + Inventory period - Accounts payable period
= 45+30+15+25-50 = 65 days

Cost of Goods Sold = 9000 x (50+25+15) = $810000

Working Capital Required = Cost of goods sold x operating cycle / 360 + Desired cash balance
= $810000 x 65 / 360 = $146250
Since desired cash balance is not given, it is not considered in working capital calculation

2.
Operating Cycle = Accounts Receivable period + Inventory period - Accounts payable period
= 45+36+15+18-60 = 54 days

Cost of Goods Sold = 50000 x (10+4+3.5) = $875000

Working Capital Required = Cost of goods sold x operating cycle / 360 + Desired cash balance
= $875000 x 54 / 360 = $131250
Since desired cash balance is not given, it is not considered in working capital calculation

As per HOMEWORKLIB RULES we are supposed to answer 1 question, i have answered 2, so kindly post others separately