Management Accounting Case Assignment

1916 words 8 pages
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
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Therefore they should consider what they do can save money first, which mean their priority job is reducing expense. From Ex 2, we see that Old Mule Farm have a large portion variable cost, and I don’t think they can cut anymore fixed cost; so we should consider how to cut back variable cost. In this case, they should decide to group cows in group base on their weight (size), and then feed them according to what they actually needs rather than supplying them as much as they can to feed the heavier cow. As I said before, I don’t think the company can cut any more fixed cost, so I want to see how about the variable cost relates to their profit especially for forage supplier. I did the what if analysis. I assume all data stay the same except variable cost, then from appendix 3 we see that variable cost and profit have a negative relationship; and only when the variable cost less than $424.68, they can be profitable. 3

Here I show the matrix to tell you what is different between each alternative under these two criterions: Alternative A (do nothing) Profitable Only if the calves price increase to $723.32, and other factors stay the same, they can be profitable (Appendix1d) B (locate cows into different group base on their size, and feed them what they really need) According to Ex4, if we assume OMF just had average 1200 weight cows in the farm, and they can produced average 613 lbs calf2(Ex4), then each cow can generate $662.04

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