Details

Case

RUKH CATTLE FARM

Muhammad Junaid Ashraf, Fazal Jawad Seyyed

INDUSTRY : Agriculture

AREA : Accounting & Control

ORGANIZATION :

LENGTH : 3

LUMS No : 01-524-2020-1

PUBLICATION YEAR : 2020

KEYWORDS:

Agri-management, Management Issues, Profitability, Management Accounting, Long-term Sustainability.

DESCRIPTION:

The case revolves around a September 2019 decision dilemma faced by Hasan Khan, a cattle fattening farm owner in Kasur. While he presently operated the farm with a lot size of 50 animals, Hasan knew that the current capacity of the farm would easily allow him to operate with 100 animals. Although he liked managing the farm, Hasan was concerned about its profitability. He had a feeling that increasing the size of each lot to 100 animals would increase the profits but not to a level where the returns would justify his time and financial investment. He believed that it was time to think about the long-term sustainability of this venture, which he suspected was linked with expanding the scale of the farm. The expansion, however, involved significant costs, and he was not certain if the financial returns would be lucrative enough.

LEARNING OBJECTIVES:

The case is ideal for a first-year MBA course in management accounting. It can also be used for an executive education program, especially if it is related to agri-management. It allows students to understand the basic concepts of fixed and variable costs, contribution margin and operating profits at different levels of activity (in this case, the size of the farm). The case is especially useful for students to understand the concept of variable costs as it contains costs that vary with animals, while others that vary with feeding time for every animal. The case also sensitizes the students about the management issues that arise in managing agri-businesses in developing countries as well as the scaling-up challenges that owner-managers may face.

SUBJECTS COVERED:

Accounting & Control