Calculate the Net Working Capital requirement for Vertical Ltd. from the following information: (per unit) Raw Material 160 Direct Labour 60 Overhead 120 Total Cost 340 Profit 60 Selling Price 400 Raw material is held in

Determination of Working capital requirement Particulars Amount (₹) Amount (₹) (A) Current Assets Cash in hand 50,000 Inventory (a) Raw material (1,04,000 × 4/52 × 160) 12,80,000 (b) Work in progress: (W.N-1) 10,00,000 (c) Finished goods: (1,04,000 × 4/52 × 340) 27,20,000 50,00,000 Debtors (W.N-2) 48,00,000 TOTAL CURRENT ASSETS (A) 98,50,000 (B) Current Liabilities Creditors (1,04,000 × 4/52 × 160) 12,80,000 Wages outstanding (1,04,000 × 1.5/52 × 60) 1,80,000 Overhead outstanding (1,04,000 × 4/52 × 120) 9,60,000 TOTAL CURRENT LIABILITIES (B) 24,20,000 Net working capital (A-B) 74,30,000 Working Notes (W.N) 1. Calculation of Work in progress (W.N-1) ₹ Raw material 100% (1,04,000 × 2/52 × 160) 6,40,000 Direct labour 50% (1,04,000 × 2/52 × 60) 1,20,000 Overheads 50% (1,04,000 × 2/52 × 120) 2,40,000 Work in progress 10,00,000 2. Calculation of Debtors (W.N-2) Assumption: As the credit sales are not given in the question. The question is solved assuming the credit sales as 75%. Any other percentage of credit sales may be assumed and the debtors will change accordingly. Debtors on selling price = 1,04,000 × 8/52 × 400 × 75/100 = ₹48,00,000 Alternatively, Debtors can be calculated on Cost price. In that case the answer will change accordingly Debtors on cost = 1,04,000 × 8/52 × 340 × 75/100 = ₹40,80,000 Therefore, Net working Capital = ₹91,30,000 - ₹24,20,000 = ₹67,10,000