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Farms Case docx pdf

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QUESTION 1-3 What is the appropriate cow size for the herd? 1,100lbs is the best cow size for the heard. Marginal analysis shows that at the current price of $148/cwt, BRF would reduce its expenses... (though marginal benefit and marginal cost would still not be equal). Increasing or decreasing size will cause a further loss in marginal net benefits and thus make it less profitable Cow Weight Avg. calf Weaning Weight Revenue per cow (VR) Revenue per cow (MR) DN Cost (VC) Supplement + Mineral Cost (VC) Other Variable Costs (VC) Contribution Margin (VRVC) Fixed Costs per cow with 50 cows (FC) Total Costs Total Costs (MR) Net Benefit Net Benefit (MR) 1000 585 (58.5%) 865.8 199.29 95.36 304.72 266.43 293.98 893.35 -27.55 1100 611 (55.5%) 904.28 38.48 214.47 104.9 304.72 280.19 293.98 918.07 24.72 -13.79 13.76 1200 617 (51.4%) 913.16 8.88 228.71 114.43 304.72 265.3 293.98 941.84 23.77 -28.68 -14.89 1300 622 (47.8%) 920.56 7.4 242.94 123.97 304.72 248.93 293.98 965.61 23.77 -45.05 -16.37 1400 630 (45%) 932.4 11.84 256.23 133.5 304.72 237.95 293.98 988.43 22.82 -56.03 -10.98 Which approach best measured the appropriate cow size: weaning a calf at 50% of the mother’s weight or comparing the value of a calf to the cost of maintaining the cow? Comparing the value of a calf to the cost of maintaining the cow has a more direct correlation to the cost of producing a calf. By calculating the marginal cost of increasing cow weight, we can determine the optimal (most profitable) weight of a cow. Weaning a calf that is 50 percent of the mother’s weight may be less profitable because increases in revenue from calf weight may not outweigh increases in expenses due to the cow's weight. [Show More]

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