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CS Executive · Corporate Accounting and Financial Management · Working Capital Management

Kiran Ltd. plans annual output of 1,20,000 units (300 working days). Cost per unit: raw material Rs 40, labour Rs 20, overheads Rs 20 (all cash). Raw material stock: 30 days; work-in-progress: 10 days (fully complete in material, 50% in labour and overheads); finished goods: 20 days; debtors: 30 days at cost; creditors: 15 days for materials. Cash balance Rs 50,000. Ignoring other items, the net working capital required is:

Recomputed correctly, net working capital is Rs 21,30,000, which is not among the stated figures, so this question is invalid.

  1. ARs 9,10,000Correct
  2. BRs 8,60,000
  3. CRs 10,10,000
  4. DRs 9,60,000

Explanation

Units/day = 400. Raw material stock = 30x400x40 = 4,80,000. WIP = 10x400x(40+0.5x40) = 4,000x60 = 2,40,000. FG = 20x400x80 = 6,40,000. Debtors = 30x400x80 = 9,60,000. Cash 50,000. Total current assets = 23,70,000. Creditors = 15x400x40 = 2,40,000. Net = 21,30,000. Check: recompute gives the same.

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