Cost Management 10.38 Jordan, the owner of Unique Sinks, realizes that if he wit
ID: 2492686 • Letter: C
Question
Cost Management 10.38
Jordan, the owner of Unique Sinks, realizes that if he withdraw the full amount of dividend, and if the slump in housing continues into the next year, he may have to borrow more money than he can easily repay. He would like to alter strategies or operating plans during the fourth quarter so that he could pay at least a $50,000 dividend and end the year with $300,000 in cash to cover potential shortfalls in the next year.
B. Return to the original assumptions. Now modify the assumptions and perform sensitivity analyses to determine what changes to volumes, prices, and/or customer collection patterns would provide the desired dividend. Leave all other assumptions unchanged.
1. List the changes in your final sensitivity analysis, and explain why you chose this set of changes.
2. Briefly explain what Jordan would need to do to implement each of these changes.
3. List several factors that could influence whether the company would be able to achieve the desired results
Explanation / Answer
There are many factors by which the cost of Jordan has been increased for example less sale price quoted, material purchased costly, material not effectively used, labor hired at increases prices, labor not utilised efficiently, etc. Now the Jordan can decrease prices by managing 20% of its entity's operation. He can maintain a budget which provide the target cost to be expended, and a desired cash flow and profit to be achieved so that he would remain with enough cash.