Budget sensitivity analysis, strategic and operating plans, business risks Jeffery, the owner of Unique Sinks, realizes that if he withdraws the full amount of dividend, and if the slump in housing starts continues into the next year, he may need 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, have 0 balance on the line of credit borrowing and eliminate the loss from 4th quarter.

Transcribed Image Text:

A. Cost side subgroup: Modify the assumptions and perform sensitivity analyses to identify a set of cost reductions and/or payment deferrals that would allow Jeffery to meet his goals. 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 Jeffery would need to do to implement each of these changes. 3. List several business risks or other factors that could influence whether the company would be able to achieve the desired results. Be sure to check your projected results against all 4 goals. B. Revenue side subgroup: 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 unchangec. 1. List the changes in your final sensitivity analysis, and explain why you chose this set of changes 2. Briefly explain what Jeffery 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. Be sure to check your projected results against all 4 goals