With the following information, prepare a statement showing the Working Capital required to finance a level of activity of 10,400 units per annum:
- Selling Price per unit is Rs. 5.
- Expected ratio of cost to selling price:
| Raw materials | 40% |
| Direct wages | 10% |
| Overhead | 30% |
| Profit | 20% |
Raw materials are expected to remain in the store for an average period of 2 months before being issued for production, and materials are in process on an average period of 6 weeks.
- Finished goods will stay in the store approximately for 6 weeks before getting dispatched to customers.
- Credit allowed to debtors is for a period of 2 months.
- Credit allowed by creditors is for a period of 2 months.
- Lag in payment of wages and overheads are for a period of 2 weeks each.
- Cash in hand and at bank is expected to be Rs. 10,000.
It may be noted that production has been carried on evenly during the year, and wages and overheads accrue similarly. Assume there are 4 weeks in a month.
