Answer to Question #219465 in Financial Math for ANU

Question

5. A proforma cost sheet of a company provides the following particulars

Elements of cost

Material - 40%

Direct labour - 20%

Overheads - 20%

The following further particulars are available

a) It is proposed to maintain a level of activity of 2, 00,000 units

b) Selling price is Rs 12 per unit

c) Raw materials are expected to remain in stores for an average period of

one month

d) Material will be in process, on average half a months and is assumed to

be consisting of 100% raw material, wages and overheads

e) Finished goods are required to be in stock for an average period of one

month

f) Credit allowed to debtors is two months

g) Credit allowed by suppliers is one month

You may follow that sales and production follow a consistent pattern,

You are required to prepare a statement of working capital requirements a

forecast profit and loss account and balance sheet of company assuming that

Share capital -Rs 15, 00,000

8% debentures -Rs 2, 00,000

Fixed Assets -Rs 13, 00, 000

Answer 1

Data given:

Elements of cost

Material - 40%

Direct labour - 20%

Overheads - 20%

Sales (units) = 2, 00,000 units

Selling Price = Rs.12

Inventory Raw materials =one month

Material will be in process, on average half a months and is assumed to

be consisting of 100% raw material, wages and overheads

Inventory (Finished goods) = one month

Credit allowed to debtors = two months

Credit allowed by suppliers = one month