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Question - Credit Management - hinanifaf - 07-29-2010
Good Day,
Question - Managerial finance - Credit management
Data on Mash company ltd manufacturing company
Turnover for the year R1 500 000
Costs as a %
Direct materials 30%
Direct labour 25%
Variable overheads 10%
Fixed overheads 15%
Selling and distribution 5%
On average
1. Debtors take 2.5months before payment
2. Raw materials are in stock for three months
3. Work-in-process represents 2 months worth of half produced goods
4. Finished goods represents 1 month's production
5. Credit is taken as follows
i.Direct materials 2 moths
ii.Direct labour 1 week
iii.Variable overheads 1months
iv.Fixed overheads 1months
v.Selling and distribution .5months
Work-in-process and finished goods are valued at material,labour and variable expense cost.
What will be my working capital requirement assuming the labour force is paid for 50 working weeks a year.
I will really appreciate if someone can at least give me a clue where to begin, or how to go about.
Many thanks in advance
Flora
- Information Consultant - 07-30-2010
i will solve this assignment how many days u have to submit this assignment
- hinanifaf - 07-31-2010
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Information Consultant</i>
<br />i will solve this assignment how many days u have to submit this assignment
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I tried to work through the question,you can add and deduct.
Yearly Monthly
D/m 450000/12 37500
D/l 375000/12 31250
VOH 150000/12 12500
FC 225000/12 18750
Selling 75000/12 6250
Credit Term
DM 37500 X 2/11 = 6818
DL 31250 X 1/50 = 625
VOH 12500 X 1/11 = 1136
FOH 18750 X 1/11 = 1705
Selling 6250 x 05/11 = 284
Accounts receiva
RM 37500 X 3/11 = 10227
WIP 81250 X 2/11 X .5X10227 = 75540
Finished goods 106250
Inventory costs 192017
Debtors Sales x 2.5/11 340909
Working Capital requirement 532926
The 12months - 1month = 11 because in the first month nothing was produced yet.
Please edit the due date is 2 August 2010.
Thanks
RM