GX Ltd is about to commence a new business for which you are asked to calculate its average Working Capital Requirement for the first year with the help of the following information:
|
|
Average Credit Period
|
Estimated Amount for 1st year (Rs.)
|
|
Purchase of Raw Materials
|
6 weeks
|
26,00,000
|
|
Wages
|
1.5 weeks
|
19,50,000
|
|
Overheads:
|
|
|
|
Rent & rates
|
6 months
|
1,00,000
|
|
Salaries to staff
|
1 months
|
3,60,000
|
|
Insurance
|
3 months
|
2,00,000
|
|
Selling expenses
|
2 weeks
|
4,55,000
|
|
Other Overheads
|
2 months
|
6,00,000
|
|
Sales:
|
|
|
|
Cash
|
-
|
1,40,000
|
|
Credit
|
7 weeks
|
65,00,000
|
|
Average amount of stock & WIP
|
-
|
3,00,000
|
|
Average amount of undrawn profit
|
-
|
3,10,000
|
Sales are made at an even rate for the year. An overdraft limit of Rs. 1,50,000 has been arranged with the banker.