1.Compare and contrast the qualitative aspects of the different production methods. Are there considerations here that are...
Question:
1.Compare and contrast the qualitative aspects of the different production methods. Are there considerations here that are not specified in the problem as stated? Have we specified all of the potential factors that differ among the three production techniques? Could any of these factors have a financial impact?
2.This exercise only considers gross profit. What costs are we missing to give us a full financial picture?
info: Production methods/techniques: At the current time, the owner has identified three different possible production methods:
1) ship the cows to a meat packaging company in South Dakota, giving them specifications on ingredients and packaging;
2) butcher the cows at the ranch, pre-mix the meat snack at the ranch, and send to a packager in Ronan for final packaging;
3) build a full production facility at the ranch and bring production entirely under the control of the owner. For options 1 and 2, the finished meat snacks are shipped back to the Colt James ranch and stored until ready for distribution. The owner has done some work evaluating the costs of each production technique; those results are presented in a table at the end of this document. Note that option 3 variable costs are valid for all ranges of output, but that option 3 fixed costs are for a production facility designed to have a maximum capacity of 200,000 units per year. Unit volumes and unit price forecast assumptions Last year, the company sold 3,000 units (packages). The expected CAGR (compound annual growth rate) for the beef snack market is 9% (for the next five years). The owner, who very much believes in his product, expects that his growth rates for the next five years (listed in order) will be: 100%, 75%, 75%, 50%, 30%. The wholesale price per unit ($7) is not expected to change.
Auditing and Assurance Services A Systematic Approach
ISBN: 978-1259162343
9th edition
Authors: William Messier, Steven Glover, Douglas Prawitt