What factors should Mr. McClintock consider in deciding whether or not to adopt a level production plan? Mr. McClintock should primarily examine these three factors in deciding whether or not to adopt a level production plan: A) Financing needs under level production plan; B) Whether current credit limit of $2 million is sufficient to cover financing need and if yes, whether bank will extend the credit limit; C) What are the risks involved in the level production plan. What savings would be involved? Cost savings under level production plan are as follow (detail calculation in excel): What will happen to Toy World's borrowing needs it if adopts level production? Prepare income statement, balance sheet and cash budget under level? Borrowing needs under level production plan is much more than seasonal production plan. Bank Borrowings (notes payables) is higher than $2 million credit limit during June to November (June-$2.05mln; July-$2.68mln; August-$3.32mln; September-$3.97mln; October-$3.13mln; November-$2.07mln). In this view, credit limit renegotiation is
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This note was uploaded on 01/16/2012 for the course MBA 101 taught by Professor Wormer during the Spring '08 term at Indian Institute Of Management, Ahmedabad.