This case includes the determination of the appropriate weigh for cows for a cow-calf operation. The trend nationally has been that the weights of the cows increase as the produce bigger calves. However, in order to ensure that the cost of the maintenance of a large cow does not exceed the benefits derived from a bigger calf, the economics of it must be analyzed. The case includes the principles of managerial accounting because of the calculation of the expenses and the divers.
1. What is the appropriate cow size for the herd using the 50% weaning rule? Compare the value of a calf to the cost of maintaining the cow as an alternative means of determining appropriate cow size.
2. Which method (50% weaning rule or marginal analysis) do you think provides the best measure?
3. What are the drivers in a cow-calf operation? Is the revenue-expense calculation (see Exhibit 2) clear regarding drivers? Why or why not?
4. How would you change the detailed statement of revenues and costs so that it provides information that would help Green make her decision?
5. To what extent is the Greens’ confusion a result of the failure of the accounting system?
6. How would the results of Old Mule Farms’ operations change if revenues or expenses were allocated in a different manner?