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Issue in transaction - Case Study Example

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Issue in transaction

The business during the manufacture and sale of large quantities of soup are likely to experience gains or losses due to the difference in foreign exchange translations. Losses or gains will also be experienced because of misjudgment on what, where or when to invest. This is a case of capital financing decision. A. Specifications The Oriental Delight soup product should and has to be produced just as the formula that was formulated by Specialty Laboratory. Apart from the production, the product must also be canned and labeled according to the requirements of Hen Hao. The specifications are well laid down and no change shall be made to them unless through writing. Concerning the specifications there is a risk that Gumpbell may not produce the goods exactly as prescribed and when this takes place, the company will suffer the damages as the goods are rejected by Hen Hao. Such an impact can be avoided if Gumpbell is sure of its production capacity to be able to fulfill the contract to the end. In addition, the labor employed by Gumpbell must posses the skills required by customers and when this is not available then Gumpbell has to recruit such a labor to avoid such risks. B. Quantities Quantities will depend on the demand requirements by the consumers as studied by the supplier (Hen Hao). Hen Hao’s annual demand is likely to be ranging between, 200,000 to 450,000 cases; this is within the term as prescribed in the supply agreement. Now Hen Hao is not capable of estimating that their current demand is and the time of the year they expect it to be shipped. Apart from the quantities depending solely on demand, the costs per unit would also influence the quantity that Hen Hao would demand. C. Purchase Order Procedure Hen Hao already has the specification of how they demand that the product be manufactured. The manufacturer already holds the specifications; what Hen Hao needs to do each time is to make purchase orders through order forms supplied by the producers (Gumpbell). Such order will be submitted online using internet resources. The purchase orders must be submitted early enough (30 days prior to when they are required) when it is expected that they would be acted upon in time. The purchase order will give the manufacturer the quantity demanded and hence decide on the amount to produce; as well, the shipping instructions and the shipping date are also included. The manufacturer is given a period from which they relax, this is despite the fact that an acknowledgement of Purchase order receipt. D. Forecasts At the onset, Hen Hao could not predict its requirements of the soup within a given specific time. This scenario is likely to change over a given period, as Hen Hao will be in a position to now conduct such forecasts and submit the purchase order forecast to Gumpbell. Failure to submit the forecasts would cause a risk that the soup may not be prepared in advance and the consumers whose appetites are sharp enough would be disappointed. Forecasts are important since most of the time they act as a guide towards that which is required. PHASE II: Transportation, Delivery, Transfer of Title and Risk of Loss Once a sales agreement has been got into, the tendency that the goods would move from one party to the other is certain. The movement involves physical movement as well as contractual movements. Just as goods would move from the manufacturer to the producers is the same way such goods are likely to move from the distributor to ...Show more

Summary

Issue in case transaction Date PHASE I Manufacture and Sale of Product This form of business is taking place between businesses in two countries that are quite far away apart. Gumpbell Soup Company is based in the United States while Hen Hao is based in China…
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