Budgeting Analysis Harvard Case Solution & Analysis

Budgeting Analysis                                                                Case Solution

The company has three available options in order to manage inventory for the following period. There is a great difference in the demand of the product of the company in each month. It is expected that the demand of the company’s product is highly unpredictable and the company is operating in a very high uncertain environment. There are three possible scenarios for managing ending inventory for subsequent months in order to avoid any problems that could be created with respect to the inventory, which include managing 50%, 90% and 3% inventory level with respect to the demand of the following month.

Due to the collection procedure of the company, the management of the company has significant cash available at the end of each month therefore, managing 3% inventory level while the management has significant cash available could create significant problem for the company as the demand of the company’s product is highly fluctuating and it suddenly increases and then decreases in each subsequent month. Therefore, managing 3% inventory level with respect to the demand of the following could be inappropriate as it could result in loss of sales in the month in which the demand increased by 100% as compared to the previous month and it will put pressure on the management of the company that could affect the performance of the management and of the company as well. Similarly, managing 90% inventory level for the following month could also be risky as it will create problem for the company with respect to managing cash as it is necessary to maintain minimum cash balance of $50,000 at the end of each month. Moreover, the company’s debt collection policy could create further problems for the company as the company is receiving less cash in the month of February......................

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