The Yarn Factory – Case Study – Kyle Benedict Nacino
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The Yarn Factory
Kyle Benedict Nacino 11108614 PROFEAS ER1 Sept 8, 2015The Yarn Factory Mr. Alah Eh is engaged in Spun Yarn manufacturing. He buys polyester filaments for manufacturing into spun yarn. Raw material requirements are imported and require at least six months of inventory. When products are sold to Textile makers, a collection period of 120 days is usually experienced. Present selling prices of Spun Yarn are at Php11.50 per kg. Mr. Eh’s factory can manufacture 12,000 kgs. of spun yarn per year of 300 days. Total manufacturing costs are at Php7.50 per kg. Raw material cost is 20% of total manufacturing cost.
In addition to maintaining working capital for his receivables and inventory, Mr. Eh has provided for 1 month of finished goods inventory and 20 days of work in process. Minimum operating cash is Php5,000.Compute for Mr. Eh’s working capital level.If Mr. Eh secures a trade credit of 30 days of raw materials, how much are his working capital needs?Selling Price: P11.50Costs: Manufacturing = P7.50 per kilo Raw Material = P1.50 per kiloAdditional data: 40kgs per day (12000/300) Collection period is 120 days Minimum operating cash = P5000Working Capital = {Estimated Cost of Goods Sold * (Operating Cycle/ 300)} +Minimum Balance
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By: Kyle Benedict Nacino
Submitted: September 9, 2015
Essay Length: 385 Words / 2 Pages
Paper type: Case Study Views: 367
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