Management Accounting Case Assignment
Alternative:
One alternative Old Mule Farms can choose is doing nothing, and just remain what they did in the past. Right now Old Mule Farms tried to minimize their expense. They sold some of their land to generate funds to cover operating cost; they rented pasturage to feed their cows; they basically focused on feeding heavier cows in order to get heavier calves, and then can generate more revenue. They also provide dietary supplements and minerals to maintain calves’ health and productivity. Old Mule Farm provided enough nutrients to cows and calves in order to produce more healthy products; it can help to improve company reputation. Variety beef products are the final goods in this industry; and nowadays more and more people concern how healthy their food is; therefore the quality of calves is very important. If we provide healthy calves, it can improve our company brand name; in the meanwhile it can attract more consumers. Also, they focus on producing heavier cows to produce heavier calves, and then can generate more money in a fast way. Moreover, the calves price is increasing during 2009-2010, and the average calves prices received by farmers in 2010 is 127.75 ($/cwt)1. Assume other conditions remain unchanged, after doing the breakeven analysis, we can find the breakeven point is 42 (appendix 1c); or if all conditions are same, they will have $2325 profit. Breakeven point is the point at which revenues equal total costs and profit is zero. By doing this analysis, we can know how many calves we need to sell in this year in order to be profitable or at least not in a business loss position. According to Ex.1, and Appendix 1(a), we know that in 2008, Old Mule Farms breakeven point is 74 which mean they should at least sell 74 calves to balance their revenue and cost. Right now they only have 50 cows so only can produce 50 calves; they need 24 more cows to be profitable. Under current conditions, they can’t support any more cows.
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One alternative Old Mule Farms can choose is doing nothing, and just remain what they did in the past. Right now Old Mule Farms tried to minimize their expense. They sold some of their land to generate funds to cover operating cost; they rented pasturage to feed their cows; they basically focused on feeding heavier cows in order to get heavier calves, and then can generate more revenue. They also provide dietary supplements and minerals to maintain calves’ health and productivity. Old Mule Farm provided enough nutrients to cows and calves in order to produce more healthy products; it can help to improve company reputation. Variety beef products are the final goods in this industry; and nowadays more and more people concern how healthy their food is; therefore the quality of calves is very important. If we provide healthy calves, it can improve our company brand name; in the meanwhile it can attract more consumers. Also, they focus on producing heavier cows to produce heavier calves, and then can generate more money in a fast way. Moreover, the calves price is increasing during 2009-2010, and the average calves prices received by farmers in 2010 is 127.75 ($/cwt)1. Assume other conditions remain unchanged, after doing the breakeven analysis, we can find the breakeven point is 42 (appendix 1c); or if all conditions are same, they will have $2325 profit. Breakeven point is the point at which revenues equal total costs and profit is zero. By doing this analysis, we can know how many calves we need to sell in this year in order to be profitable or at least not in a business loss position. According to Ex.1, and Appendix 1(a), we know that in 2008, Old Mule Farms breakeven point is 74 which mean they should at least sell 74 calves to balance their revenue and cost. Right now they only have 50 cows so only can produce 50 calves; they need 24 more cows to be profitable. Under current conditions, they can’t support any more cows.
1