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A company sells goods on a gross profit of 20%. The following information is extracted from its accounts:
(i) Sales at ( 3 months credit) = 40,00,000
(ii) Raw Material = 12,00,000
(iii) Wages paid (15 days in arrear) = 9,60,000
(iv) Manufacturing expenses outstanding (1 month in arrear) = 12,00,000
(v) Total administrative expenses (1 month in arrear) = 4,80,000
(vi) Sales promotion expenses (payable Half yearly in advance) = 2,00,000The company enjoys 1 months credit from suppliers of raw material and maintains 2 months stock of raw material and 1.50 months finished goods. Cash balance is maintained at Rs 2,00,000. Assuming a 10% safety margin, ascertain the requirements of Working Capital of the company on cash cost basis? Cost of sales for computation of debtors and stock of finished goods may be taken at sales minus gross profit as per the rate of gross profit.
There is no point in asking this in the general forum – you should ask in the forum for the relevant ACCA paper.
(Also, do not simply set test questions and expect an answer. You must have an answer in the same book in which you found the question (if not then you should be using a different book) and so you should ask about whatever it is in the answer that is puzzling you).
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