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MADISON CORPORATION

Situation Analysis of Madison Corporation

By Kush Mohnot Date of Submission- August 16, 2010

Application no 60895

FSB-1

Madison Corporation, a manufacturer of electric clocks produces 40 different models in this

quarter and has recently added highly styled Model 329 as a new product. Madison Corporation

management follows a functional structure hierarchy. Sales department in company orders the quantity of

product to be manufactured and according to this estimate production department quotes the quantity tobe purchased by Purchase department for raw materials and the fabricated parts. The company has been

following the policy of purchasing the inventory with expectation to their demand after experiencing a

heavy inventory loss of finished goods and raw materials after the price declines in year 1932. Since

electric clock is a highly seasonal business, the company has restricted itself to requisite buying of raw

materials. Sales manager is responsible for quantity to be ordered.

Model 329 is with mirror face and exposed hands. It is made of strip brass and chrome plate.

Sales manager has requisite for 4500 units of Model 329 for coming quarter of April-June. According to

present scenario stock of 1530 units and 600 unfinished units of Model 329 will be ready for shipment at

end of this month, out of which company has an order of 1350 units and the company will be left with

finished goods inventory of 780 units for next quarter.

The purchase department suggests the production department buying the raw material in larger

quantity, so they can get a discount on price on bulk purchases (Exhibit 2).For the present quarter

company with inventory of 780 units of Model 329 expects a demand of 4500 units, so they need to

manufacture 3720 units. As Model 329 is highly styled and seasonal product and companys experience

of abruptly fall in demand of styled product and also the financial trends of having below average sales

for this quarter(Exhibit 3) in comparison to other quarters , Production Manager has been following the

policy of buying the inventory as per the expected demand. If in case still the sales drop the company

reclaims the product from the dealers and sell off the product at the scrap value. The scrap value of the

plates is 14 cents.

Company has two options , to buy in bulk and reduce the cost and if sales is not according to

production sell it off at scrap value and other option which company has been doing producing as per the

demand per quarter so there is no inventory loss.

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EXHIBIT 1

The Madison Corporation

Percentage Sales of Model 329 compared to Clock industry

EXHIBIT 2Madison Corporation

Price and Savings of brass bases for Model 329

Quantity Price( cents) Savings ($)

5000 24 0

9000 21 1200

13000 19 6500

15000 18 9000

*Figures calculated keeping base quantity as 5000

EXHIBIT 3

THE MADISON CORPORATION

Quarterly Sales Of Electric Clock Units,1956-1958

Quarter 1956 1957 1958 1959

January-March 17.6% 20.4% 23.5% 13.3%

April-June 22.9% 26.9% 21.1% 16.5%

July-September 17.7% 21.9% 9.6% 37.5%

October-December 41.8% 31.4% 45.8% 32.7%

100.0% 100.0% 100.0% 100.0%

Months Sales % Sales

1959

September 3220 2.35

October 3410 2.70

November 1940 2.91

December 970 3.20

1960

January 665 3.10February 665 2.74