From the following information of Ganpati Ltd., you are required to calculate : Particulars (₹) Raw material inventory consumed during the year 6,00,000 Average stock of raw material 50,000 Average cost of production 5,0

CS Professional · Strategic Management and Corporate Finance · PYQS · June 2024
From the following information of Ganpati Ltd., you are required to calculate : Particulars (₹) Raw material inventory consumed during the year 6,00,000 Average stock of raw material 50,000 Average cost of production 5,00,000 Average work-in-progress inventory 30,000 Cost of goods sold during the year 8,00,000 Average finished goods stock held 40,000 Average collection period from debtors 45 days Average credit period availed 30 days No. of days in a year 360 days (i) Net operating cycle period.

Answer & Explanation:

Answer 5(b) (i) Calculation of Net Operating Cycle period of Ganpati Ltd. Raw Material storage period (R) = Average stock of raw material / Average Cost of Raw Material Consumption per day = (₹ 50,000 / ₹ 6,00,000) × 360 = 30 days WIP inventory holding period (W) = Average WIP inventory / Average Cost of Production per day = (₹ 30,000 / ₹ 5,00,000) × 360 = 21.60 OR 22 days Finished Goods inventory holding period (F) = Average stock of Finished Goods / Average Cost of Goods sold per day = (₹ 40,000 / ₹ 8,00,000) × 360 = 18 days Receivables (Debtors) collection period (D) = 45 days Credit Period allowed by creditors (C) = 30 days Net Operating Cycle = R + W + F + D - C = 30 + 22 + 18 + 45 - 30 = 85 days

Topics: Corporate Finance

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