The Board of Directors of Nanak Engineering Company Private Ltd. requests youto prepare a statement showing the Working Capital Requirements for a level ofactivity of 1,56,000 units of production.The following information is available for your calculations :(a)Raw materialsDirect labourOverheadsPer unit?90407520560265(b) (i)(ii)ProfitSelling price per unitRaw materials are in stock, on average one month.Materials are in process, on average 2 weeks.(iii) Finished goods are in stock, on average one month.(iv) Credit allowed by suppliers, one month.(v)Time lag in payment from debtors, 2 months.(vi) Lag in payment of wages, 12 weeks.(vii) Lag in payment of overheads is one month.20% of the output is sold against cash. Cash in hand and at bank isexpected to be 60,000. It is to be assumed that production is carried onevenly throughout the year, wages and overheads accrue similarly and atime period of 4 weeks is equivalent to a month.

Step 1:Calculation of Stock of Raw material, Work in process and Finished goods.Annual output =…

Answered: The Board of Directors of Nanak…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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