Varun Nagar Agricultural Cooperative Society

Varun Nagar Agricultural Cooperative Society

Case Study Report

Submitted by:

Kartik Sahoo (D17045)

IIT Mandi

Date: 23rd FEB 2018

Varun Nagar Agricultural Cooperative Society Consultant report:

Summary: -

VNACS   has a total of INR 10L as its assets from two different forms, INR 5L in cash & INR 5L worth of total paddy stocks. It has to pay a total sum of INR 10L  and also interest amount towards the overdraft drawn from bank from Sept 1990 to March 1991. Mr. Agarwal, Manager, VNACS has to make decisions about retaining paddy stocks as well as buying fertilizers. The decision that can be done on considering all possible options is to retain the paddy stocks and don’t go for buying fertilizers.

Situation:-

VNACS has been set up to procure the agricultural productions of member farmers and the market. It has to sustain its image as a stable, long running society before its members and the bank for the support. Whereas the members (farmers) do trust on the society to get a handsome return for their productions and in bank’s prospective it wishes to make a efficient extension of its business with the society.

Problems:- 

 VNACS has two decision problems:                                                                                                    

• Whether to retain the paddy stock or not?
• Whether to buy fertilizers or not?

The decisions shall be taken so as to go through the best interests of its members and also the bank. Considering this,  the objectives shall be of best interest of  member farmers, also to sustain a good image and also a trustworthy relation development with the bank.

Criteria:-

The following criteria are taken into consideration in decision making for the overall development of the VNACS and its members,

1. The farmers members has to be paid before 31st March 1991.
2. Maximum benefits to the member farmers have to be achieved from the sales & purchase of paddy stocks & fertilizers respectively.  
3. Relationship with the bank has to be well maintained.

Options:-

1. Sell paddy stocks to procure member farmers & buy Fertilizers with the special price.
2. Sell paddy stocks to procure member farmers & do not go for buying fertilizers.
3. Retain paddy stocks for the next 6 months & buy fertilizers with the special price.
4. Retain paddy stocks for the next 6 months & do not go for buying fertilizers.

Evaluation:-                                                                                                                                                               I:   Option I :-  The reserved cash can be used in procurement of farmers before due date. On selling of paddy with current market price it will get a total amount INR 5L. Considering the insurance cost, labor cost, interest of bank from Sept 1990 to Sept 1991, the total amount will be around INR 6L. After the 5% loss in stocks of fertilizers during the upcoming 6 months total revenue can be achieved as INR 5.7L. Hence there is a loss of INR 30,000.