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Case Study: Sawgrass Canning Company

The Sawgrass Canning Company is a small vegetable cannery processing vege-tables grown near Florida's Gulf coast. Although it is technically operated as a cooperative, it makes its decisions using cash flow analysis. Sawgrass tries to use this rule: Consider the elements of cash flow that will be affected by the decision at hand; if a cash flow item will change depending upon a decision, then it is a relevant part of cash flow; on the other hand, omit those cash flow elements that don't change as a result of the decision being made

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Solution Summary

Solution for Ques 1
Note : The below working has been done on following assumptions
1. Since Sawgrass is having less liquidity, It is assumed to deliver the Soft Drink Contract ASAP because the payment condition is immediate
2. Once the order of Soft Drink is Fulfilled, Sawgrass will utlise its maximum idle capacity to fulfill Frutiy Order
3. Labour is Paid in the same week
4. Softy Pay immediately and Fruity has a three week payment term

As we have seen here that if Sawgrass do not opt for any contract ,it is running out of money in Week10.
If Softy Contract is serviced, the net position after week 12 will be zero cash balance
If Both Contract are executed , there will be a serious liquidity Crunch in Week 4 itself where there will be a shortage of 7000.00$