The below information for Lever Ltd is provided on annual basis: Sales at 3 months credit 48,00,000 Materials consumed (suppliers extend 2 months…

Working Notes: (i) Computation of Annual Cash Cost of Production Material consumed 12,00,000 Wages 9,60,000 Manufacturing expenses 12,00,000 Total cash cost of production 33,60,000 (ii) Computation of Annual Cash Cost of Sales: Total Cash cost of production as in (i) above 33,60,000 Administrative Expenses 3,60,000 Sales promotion expenses 1,20,000 Total cash cost of sales 38,40,000 Add: Gross Profit @ 20% on sales (25% on cost of sales) 9,60,000 Sales Value 48,00,000 Statement of Working Capital requirements (cash cost basis) (₹) (₹) A. Current Assets Inventory: - Raw materials 12,00,000 × 2 months / 12 months = 2,00,000 - Finished Goods 33,60,000 × 2 months / 12 months = 5,60,000 Receivables (Debtors) 38,40,000 × 3 months / 12 months = 9,60,000 Sales Promotion expenses paid in advance 1,20,000 × 1 month / 12 months = 10,000 Cash balance 1,00,000 18,30,000 B. Current Liabilities: Payables: - Creditors for materials 12,00,000 × 2 months / 12 months = 2,00,000 Wages outstanding 9,60,000 × 1 month / 12 months = 80,000 Manufacturing expenses outstanding 12,00,000 × 1 month / 12 months = 1,00,000 Administrative expenses outstanding 3,60,000 × 1 month / 12 months = 30,000 4,10,000 Net working capital (A - B) 14,20,000 Add: Safety margin @ 15% 2,13,000 Total Working Capital requirements 16,33,000