50. The W.M. Ltd. proposes to raise its turnover from Rs. 6,00,000 to Rs. 8,40,000 next year and to Rs. 9,60,00 in the succeeding year. It is expected that the purchases will go up from Rs. 1,80,000 to Rs. 2,40,000 and then to Rs. 2,70,000 in the next two years. A steady profit of 10% on turnover is estimated over the years, and the materials, labor and factory overheads are expected to be 30%, 20% and 30% respectively of the total cost of goods sold. At the end of each year, the raw material stock would amount to two months consumption, work-in-progress to one month's factory cost and finished goods to half a month's total cost. There is a two-month credit period allowed to customers and received from suppliers. The company has a policy of carrying costs equivalent to one month's requirement for payment of labor and other overhead cost. Ignoring repayments and accrued charges as they normally offset each other. Work out an estimate of working capital requirement for all the three years separately.
50. The W.M. Ltd. proposes to raise its turnover from Rs. 6,00,000 to Rs. 8,40,000 next year and to Rs. 9,60,00 in the succeeding year. It is expected that the purchases will go up from Rs. 1,80,000 to Rs. 2,40,000 and then to Rs. 2,70,000 in the next two years. A steady profit of 10% on turnover is estimated over the years, and the materials, labor and factory overheads are expected to be 30%, 20% and 30% respectively of the total cost of goods sold. At the end of each year, the raw material stock would amount to two months consumption, work-in-progress to one month's factory cost and finished goods to half a month's total cost. There is a two-month credit period allowed to customers and received from suppliers. The company has a policy of carrying costs equivalent to one month's requirement for payment of labor and other overhead cost. Ignoring repayments and accrued charges as they normally offset each other. Work out an estimate of working capital requirement for all the three years separately.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:50. The W.M. Ltd. proposes to raise its turnover from Rs. 6,00,000 to Rs.
8,40,000 next year and to Rs. 9,60,00 in the succeeding year. It is expected
that the purchases will go up from Rs. 1,80,000 to Rs. 2,40,000 and then to
Rs. 2,70,000 in the next two years. A steady profit of 10% on turnover is
estimated over the years, and the materials, labor and factory overheads are
expected to be 30%, 20% and 30% respectively of the total cost of goods sold.
At the end of each year, the raw material stock would amount to two months
consumption, work-in-progress to one month's factory cost and finished goods
to half a month's total cost. There is a two-month credit period allowed to
customers and received from suppliers. The company has a policy of carrying
costs equivalent to one month's requirement for payment of labor and other
overhead cost. Ignoring repayments and accrued charges as they normally
offset each other. Work out an estimate of working capital requirement for all
the three years separately.
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