1. The document provides profit/loss and balance sheet data for NCEP Limited and ABC Limited for two years, and asks to calculate the duration of the cash cycle for each. It also provides annual figures for Sugarcolt Limited and asks to calculate working capital requirements. 2. The document provides annual sales, material consumption, wage, expense and promotion figures for Universal Limited and asks to calculate working capital requirements assuming a 20% safety margin. It also provides data on inventory levels and cash balances. 3. The document presents 7 inventory management problems involving calculating economic order quantities and total inventory costs under different order sizes and discount scenarios. It

1. 1. The following information is available for NCEP Limited.
Profit and Loss Account Data Balance Sheet Data
Beginning of 20X6 End of 20X6
Sales 6000 Inventory 800 820
Cost of goods sold 4000 Accounts receivable 500 490
Accounts payable 290 205
What is the duration of the cash cycle?
2. The following information is available for ABC Limited.
Profit and Loss Account Data Balance Sheet Data
Beginning of 20X5 End of 20X5
Sales 3000 Inventory 300 310
Cost of goods sold 1800 Accounts receivable 180 170
Accounts payable 85 95
What is the duration of the cash cycle?
3. The following annual figures relate to Sugarcolt Limited.
Rs.
Sales (at two months' credit) 6,000,000
Materials consumed (suppliers extend two months credit) 1,600,000
Wages paid (monthly in arrear) 1,300,000
Manufacturing expenses outstanding at the end of the year 140,000
(Cash expenses are paid one month in arrear)
Total administrative expenses, paid as incurred 440,000
Sales promotion expenses, paid quarterly in advance 200,000
The company sells its products on gross profit of 20 percent counting depreciation as part of the
cost of production. It keeps one month's stock each of raw materials and finished goods, and a
cash balance of Rs.200,000.
Assuming a 25 % safety margin, work out the working capital requirements of the company on
cash cost basis. Ignore work-in-process.
4. The following annual figures relate to Universal Limited.
Rs.
Sales (at three months' credit) 8,000,000
Materials consumed (suppliers extend one months credit) 2,000,000
Wages paid (monthly in arrear) 1,600,000
Manufacturing expenses outstanding at the end of the year 100,000
(Cash expenses are paid one month in arrear)
Total administrative expenses, paid as incurred 500,000
Sales promotion expenses, paid quarterly in arrears 400,000

2. The company sells its products on gross profit of 30 percent counting depreciation as part of the
cost of production. It keeps two months’ stock each of raw materials and finished goods, and a
cash balance of Rs.300,000.
Assuming a 20 % safety margin, work out the working capital requirements of the company on
cash cost basis. Ignore work-in-process.

3. Inventory Management:
1. Pioneer Stores is trying to determine the economic order quantity for a certain type of
machine tool. The firm sells 60,000 numbers of this machine tool annually at a price of
Rs.80 per piece. The purchase price per machine tool to the firm is, however, Rs.65.
The cost of carrying a machine tool is Rs.10 per year and the cost of placing an order is
Rs.80.
(a) What is the total cost associated with placing one, two, five, and ten orders per
year?
(b) What is the economic order quantity?
2. National Stores is trying to determine the economic order quantity for certain type of
transformers. The firm sells 400 numbers of this transformers annually at a price of
Rs.300 per piece. The purchase price per machine tool to the firm is, however, Rs.230.
The cost of carrying a transformer is Rs.40 per year and the cost of placing an order is
Rs.180.
(a) What is the total cost associated with placing one, four, eight , and ten orders per
year?
(b) What is the economic order quantity?
3. Harilal Company requires 25,000 units of a certain item per year. The purchase price per
unit is Rs.60; the carrying cost per year is 30 percent of the inventory value; and the fixed
cost per order is Rs.400.
(a) Determine the economic order quantity.
(b) How many times per year will inventory be ordered, if the size is equal to the EOQ?
(c) What will be the total cost of carrying and ordering inventories when 10 orders are
placed per year?
4. Kamal and Company requires 50,000 units of a certain item per year. The purchase price
per unit is Rs.20; the carrying cost per year is 15 percent of the inventory value; and the fixed
cost per order is Rs.100.
(a) Determine the economic order quantity.
(b) How many times per year will inventory be ordered, if the size is equal to the EOQ?
(c) What will be the total cost of carrying and ordering inventories when 10 orders are
placed per year?
5. Consider the following data for a certain item purchased by Jaibharat Stores..
Annual usage = 10,000 units
Fixed cost per order = Rs.200
Purchase price per unit = Rs.160
Carrying cost = 25 percent of inventory value
What is the economic order quantity?
Now, assume that a discount of Rs.6 per unit is offered if the order size is 2,000 units.
Should Jaibharat seek the quantity discount?
6. Consider the following data for a certain item purchased by Liberty Stores.
Annual usage = 25,000 units

4. Fixed cost per order = Rs.400
Purchase price per unit = Rs.360
Carrying cost = 35 percent of inventory value
What is the economic order quantity?
Now, assume that a discount of Rs.10 per unit is offered if the order size is 3,000 units.
Should Liberty seek the quantity discount?
7. Shaheed Corporation requires 10,000 units of a certain item annually. The cost per unit
is Rs.50, the fixed cost per order is Rs.200, and the inventory carrying cost is Rs.8 per
unit per year.
The supplier offers quantity discount as follows:
Order Quantity Discount Percentage
2,000 6
3,000 8
What should Shaheed Corporation do?
8. Merit International requires 15,000 units of a certain item annually. The cost per unit is
Rs.80, the fixed cost per order is Rs.350, and the inventory carrying cost is Rs.10 per unit
per year.
The supplier offers quantity discount as follows:
Order Quantity Discount Percentage
3,000 4
5,000 7
What should Merit International do?