1. Determining the net working capital (NWC) requirement of the company for the current year. Strong Cement Company Ltd

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1 Determining The Net Working Capital Nwc Requirement Of The Company For The Current Year Strong Cement Company Ltd 1 (155 KiB) Viewed 48 times

1. Determining the net working capital (NWC) requirement of the company for the current year. Strong Cement Company Ltd has an installed capacity of producing 1.25 lakh tonnes of cement per annum; its present capacity utilisation is 80 per cent. The major raw material to manufacture cement is limestone which is obtained from the company's own mechanised mine located near the plant. The company produces cement in (30 with last digit of your ID) kgs bags. Cost structure per bag of cement (estimated) Rs. 25 15 30 10 50 30 Items Gypsum Limestone Coal Packing material Direct labour Factory overheads (including depreciation of Rs 10) Administrative overheads Selling overheads Total cost Profit margin Selling price Add: Sale tax (10 per cent of selling price) Invoice price to consumers 20 25 205 45 250 25 275 Additional information: (i) Desired holding period of raw materials: Gypsum, 3 months Limestone, 1 month Coal, 2.5 months Packing material, 1.5 months (ii) The product is in process for a period of 0.5 month (assume full units of materials, namely gypsum limestone and coal are required in the beginning; other conversion costs are to be taken at 50 per cent). (iii) Finished goods are in stock for a period of 1 month before they are sold. (iv) Debtors are extended credit for a period 3 months. (v) Average time lag in payment of wages is approximately 0.5 month and of overheads, 1 month. (vi) Average time lag in payment of sales tax is 1.5 months. (vii) The credit period extended by various suppliers are: Gypsum, 2 months Coal, 1 month Packing material, 0.5 month. (viii) Minimum desired cash balance is Rs last two (2) digit of your ID lakh. You may state your assumptions, if any. 2. An engineering company is considering its working capital investment for the next year Estimated