Caase study

The two aboriginal functions of Varian Magna Agricultural Cooperative Society (EVANS) ar procurance of agricultural produce from the farmers & selling it to the amandine, and procurement & supply of agricultural inputs to the farmers. The accusive is to devise a strategy for EVANS for good use of funds with respect to procurement and sales event. Criteria Benefit of the farmers should be the top antecedence while planning the strategy.Financial planning moldiness be done carefully in view of the readyed supply of funds. division of prices of payday as well as fertilizers during diametric seasons must be used to the receipts of EVANS. Since the society shares a good kindred with the bank, this must be leveraged to suit take credit facilities. Options We assume that EVANS maintains minimal swimming gold to handle administrative expenses and interest.Some of the germane(predicate) options are listed below Option 1 Option 2 Option 3 Evaluation Option 1 Farmers arrive s ufficient funds to plan commodious term Losing out on steeper(prenominal) borderlines by selling payday at incumbent price apostrophize benefit on early arches of fertilizers is marginal Initial cash balance Cash paid to farmers tax from payday sales +500000 Fertilizers purchase expense Overheads -35000 amusing Extension Option 2 Cost benefit by postponing payday sales is high Insurance for payday -10000 From reserves Option 3 Farmers ask their office staff of their share on time Cost benefit on early purchase of fertilizers can besides be leveraged Credit limit backstage translates to higher interest Part defrayal to farmers -250000 -38000 -298000 Interest -15000 Decision The high constitute of reposition, labor and equipment and the low savings margin make the early purchase of fertilizers an plain option.On the other hand, there would be a significant loss with regard to chance apostrophize since we are selling payday at the current price of INNER 5000 per ton. Moreover, a marginal extension of Overdraft limit is unavoidable to accommodate operations. The higher margin on payday sales can be leveraged by holding 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 pine run. If the members agree to give up part payment towards procuring fertilizers at the discounted price, they can get the coupled benefits of the higher margins on payday and decreased fertilizer costs. Therefore, we inspire option 3.Action found on the calculations below, accounting for minimum and upper limit possible price of payday in 6 months, we can bring about a substantial reduction in cost per bag of fertilizers. Min Max 630000 750000 dinero margin 130000 250000 (-) Interest Net cabbage from payday sales 210000 Fertilizer cost 475000 38000 tot up Cost 513000 (-) Net profit from payday sales revise 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 revenue right away. This option in addition requires the bank to allow an extended overdraft limit to EVANS. In the circumstance, that either or two parties are unwilling to accept this proposal, we recommend option 2 as a backup.