Caase study

The two primary functions of Varian Magna Agricultural Cooperative Society (EVANS) atomic number 18 procurance of agricultural produce from the farmers & marketing it to the amandine, and procurement & supply of agricultural inputs to the farmers. The impersonal is to devise a strategy for EVANS for efficient use of funds with evaluate to procurement and sale. Criteria Benefit of the farmers should be the top priority while protrude the strategy.Financial planning must be done carefully in behold of the adjusted supply of funds. Variation of prices of payday as well as fertilizers during antithetical seasons must be used to the advantage of EVANS. Since the society shares a darling relationship with the bank, this must be leveraged to suit required credit facilities. Options We gain that EVANS maintains token(prenominal) liquid cash to handle administrative expenses and interest.Some of the relevant excerptions are listed be humiliated Option 1 Option 2 Option 3 Evaluati on Option 1 Farmers get sufficient funds to plan long term Losing out on high adjustments by sell payday at current price speak to benefit on un fourth dimensionly arches of fertilizers is marginal Initial cash balance Cash paid to farmers tax from payday sales +500000 Fertilizers purchase expense Overheads -35000 ODD Extension Option 2 Cost benefit by postponing payday sales is high Insurance for payday -10000 From militia Option 3 Farmers get their part of their share on time Cost benefit on early purchase of fertilizers can as well as be leveraged Credit limit extension translates to higher interest infract payment to farmers -250000 -38000 -298000 Interest -15000 Decision The high cost of storage, labor and equipment and the low savings margin make the early purchase of fertilizers an unattractive option.On the different hand, there would be a significant loss with regard to probability cost since we are selling payday at the current price of inward 5000 per ton. Mor eover, a marginal extension of Overdraft limit is required to support operations. The higher margin on payday sales can be leveraged by safekeeping the stock in storage for 6 months. The high overheads of storing fertilizers can be avoided. Since we have sufficient reserves, we can support daily operations with minimal funds. The objective of the Co-operative society is to benefit the farmers over the long run. If the members agree to lend oneself up part payment towards procuring fertilizers at the discounted price, they can get the bring together benefits of the higher margins on payday and reduced fertilizer costs. Therefore, we recommend option 3.Action found on the calculations below, accounting for minimum and maximum possible price of payday in 6 months, we can bring about a substantial reducing in cost per bag of fertilizers. Min Max 630000 750000 Profit margin 130000 250000 (-) Interest Net profit from payday sales 210000 Fertilizer cost 475000 38000 kernel Cost 513000 (-) Net profit from payday sales Revised Total Cost of Fertilizers 423000 303000 Revised cost per bag of Fertilizers 222. 63 159. 47 Contingency Since our recommended option requires deferring part payment, the farmers do not receive the entire sale receipts right away. This option also requires the bank to allow an extended overdraft limit to EVANS. In the circumstance, that either or both parties are unwilling to sham this proposal, we recommend option 2 as a backup.