Working Capital Management Project Essay

1523 Words Oct 11th, 2012 7 Pages
Working Capital Management: Analysis Project #1 Fall, 2012 Dr. Echevarria Cameron School of Business

Working Capital Management Project The WCM project is an exercise using an enhanced cash budget to make changes to operating parameters in order to observe the impact on the pro forma income and balance sheet statements. The exercise uses an MS Excel spreadsheet. There are several management strategy options that will be simulated in order to gauge the results on operating cash flows and profitability. You task will be to analyze each option and determine which options will improve profitability.

Your analyses will be written using a MS-Word document. Copy and paste from the spread sheet only the 6 [green] cells containing the
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This lease facility is located in the same industrial park facility.

The generators are sold FOB Richardson, TX at a list price of $2,495. The manufacturer's suggested retail (MSRP) price is $3195.00. The market for LEC's power generators has been growing at the rate of 3 to 5% per year. The terms are Net 30 for US customers. Canadian and Mexican shipments are net 60 or 90 days depending on the customer’s credit history. The management of RES is looking to expand its markets to Africa, Asia, and Europe.

Production Facility and Production Standards The current facility was built in 1998 to provide sufficient space to support sales, service, and the administrative staff as well as the production facility. Approximately 90,000 square feet are allocated for production operations. 70,000 square feet comprise the production area; the remaining area (20,000 sq. ft.) is allocated for shop-floor control, materials handling, and areas for inspection, packaging, shipping and receiving. The current layout of the production facility is designed to support a maximum capacity of 48,000 units per year (4000 per month maximum capacity). The most efficient production rate has proved to be 3200 units per month. When this production rate is exceeded or reduced, production costs increase approximately 3% for each 5% increase or decrease in production rate (from the 3200 per month best rate). See formulas on

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