Prepare Working Capital Requirement Forecast

A company plans to manufacture and sell 400 units of a domestic appliance per month at a price of Rs 600 each. The ratio of costs to selling price are as follows:

Fixed overheads are estimated at Rs4,32,000 per annum.

The following norms are maintained for inventory management:

Raw materials                   30 days

Packing materials              15 days

Finished goods                  200 units

Work-in-progress              7 days

Other particulars are given below: 

(a) Credit sales represent 80% of total sales and the dealers enjoy 30 working days credit. Balance 20% are cash sales.

(b) Creditors allow 21 working days credit for payment.

(c) Lag in payment of overheads and expenses is 15 working days.

(d) Cash requirements to be 12% of net working capital.

(e) Working days in a year are taken as 300 for budgeting purpose.

Prepare a Working Capital requirement forecast for the budget year.

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