Agricultural Studies > CASE STUDY > Case Analysis Black River Farms (All)
Case Analysis: Black River Farms" Parisa Poormohammadi 200411658 Prof. Robert Anderson 2019-10-14 the Black River Company has faced rising costs and declining price for its cows. Looking at the... prices of cows, it can be seen that their price trend has been deteriorating since 2014. On the other hand, it has been believed over the years that the higher-weight cows produce larger calves, which can then make a good profit from their sale for the company. However, the analysis shows that the Black River Company has a negative profit margin. Therefore, one of the problems for the company is determining the right weight for cows and achieving a positive contribution margin. Since heavier cows have higher forage, supplements, and mineral costs, estimating the most profitable size of cows plays a vital role in bringing the company into better financial condition. Based on this analysis, they will be able to determine which weight category is the most appropriate and profitable, and accordingly they will be able to manage and control their costs. In the remainder of this report, we first look at cost drivers of the company, then propose the best weight for cows to achieve a positive contribution margin, and finally calculate the company breakeven point. One of the problems with accounting reports of Black River is that both fixed and variable costs are driven by the number of cows and do not take into account one of the important drivers of cost, which is the weight of cows. Therefore, given that the variable costs, especially supplements, minerals, and dry matters must be considered on the basis of their weight, the main cost driver in this report is the weight of the cows and for a more detailed analysis, the accountant should also consider this factor as a cost driver. Given that this report is based on CVP analysis, the rest of the costs are assumed to be fixed, although they appear to be mixed costs. [Show More]
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