Working Capital

Topics: Costs, Debt, Inventory Pages: 3 (809 words) Published: July 24, 2013
Practice Questions – Working Capital Management

Q.1. Spring Enterprises require 30,000 units of input annually to sustain its production at the current level. The carrying cost is Rs 32 per unit while the ordering cost is Rs 5000 per order. The cost per unit of input is also Rs 32. Determine the EOQ for Spring Enterprises. What would be the firm’s policy of inventory acquisition if the firm’s suppliers offer quantity discount as follows:

Order size (units)Discount (%)
3999. 0
7999. 0.01
8000-119990.0125
12000-159990.02
16000 and above0.03

Q.2. Classify the following items using the ABC method of inventory classification: |Item no. |Annual usage (units) |Unit price (Rs) | |1 |120000 |120 | |2 |110000 |100 | |3 |100000 |90 | |4 |113000 |32 | |5 |150000 |22 | |6 |180000 |10 | |7 |240000 |5 | |8 |220000 |4 | |9 |160000 |2 | |10 |205000 |1 |

Q.3. The management of Sapient Ltd. in view of increased competition from overseas owing to reduction in excise duty, is facing an intense competition in the sector. To give a boost to its sliding sales, the management is contemplating an increase in the credit period offered to its customers. At present the company offers 30 days of credit period to its suppliers and it proposes to increase it to...
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