Transcript The Ostrich Farm - Bilkent University

The Ostrich Farm
Financial Accounting
1
Basic Information
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commercial ostrich industry began about 150
years ago in South Africa
especially good for their meat
eggs are edible but they are mainly used for
breeding and art purposes
one pair of mature ostrich is worth about 8 ostrich
eggs
one adult ostrich yields around 100 kg of meat
100 kg meat is worth about 9 eggs
One adult ostrich consumes about 35 kg of feed
per day
Financial Accounting
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Beginning-1
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father divided his ostrich farm of 30 squared
kilometers that is worth ninety ostrich eggs
between his two daughters
total of thirty ostriches
the daughters did not own the land or the
ostriches but were responsible from running the
operations
older daughter received a land of 20 squared
kilometers with 20 ostriches, and the younger the
remaining land with its ostriches
Financial Accounting
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Beginning-2
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In each piece of land there is one egg incubator
that is expected to last eight years with good use,
and a portable shelter for the animals which can
usually be used for two years.
Each egg incubator is worth two pairs of ostriches
and the shelter about two eggs.
The father also gave each daughter bird feed that
would be enough for the first half of the year.
1000 kg of feed is worth one egg.
Financial Accounting
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Decision
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Which daughter is doing better?
Criteria?
Financial Accounting
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What do we need to answer?
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“performance”
ownership
common denominator or measurement unit
Financial Accounting
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Solution
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Common denominator – eggs or birds?
Father or daughters?
Wealth increase? How to measure?
Financial Accounting
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Measurement Unit -Eggs
Ostrich Farm
one pair ostrich
one ostrich
1km2 land
incubator
portable shelter
1000 kg feed
100 kg meat
8
4
3
4
2
1
9
eggs
eggs
eggs
ost
eggs
egg
eggs
or
Financial Accounting
16 eggs
8
Older Sister
Beginning
ostrich
land
incubator
feed
shelter
eggs
20
4
20
3
1
16
126000 /1000
1
2
total egs
80
60
16
126
2
284
Financial Accounting
Capital –whose?
9
During the year- Older
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slaughtered 9 ostriches at midyear (assume one
year is 360 days) and exchanged the meat for
another portable shelter and bird feed
The hens laid a total of 300 eggs of which 2 were
broken
She gave 45 eggs to her helpers and 3 eggs to the
veterinarian
the egg incubator broke down and she promised
to give the fixer 2 eggs during the next season
Her father took 25 eggs
Financial Accounting
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End of the year- Older
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At the end of the year, she received 25
pairs of ostriches of a different breed in
exchange for 9 eggs a pair. These ostriches
are expected to be ready for processing
when they are 18 months old, at almost half
the age of the other breed.
Financial Accounting
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During the year: Older
feed purchased:
from meat:
9
81 eggs
2
79 eggs
shelter
purchased
available:
used *
ending balance
205 eggs
195.3 eggs
9.7 eggs
*126 eggs plus 69.3 eggs
Financial Accounting
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feed:
first 6 mo
ost
per day
days
eggs
20
35
180
126000
126
second six months
ost
11
kg
per day
35
days
180
kg
69300
beg bal waste
0
kg
used
69300
eggs
69.3
Financial Accounting
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During the year – Older –2
eggs used:
25
45
3
2
25
ost.pairs
helpers
vet
broken eggs
father
Financial Accounting
eggs
9
225
45
3
2
25
300
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End of the year Older
ostrich
feed
land
incubator
shelter
number eggs
tot eggs
11
4
44
25
9
225
269
9.7
60
1
16
16
2
2
4
358.7
Financial Accounting
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Younger sister
Beginning
eggs
total egs
ostrich
10
4
40
land
10
3
30
incubator
1
16
16
feed
126000 /1000
63
shelter
1
2
total
151 Capital –whose?
Financial Accounting
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During the year- Younger
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hatched 10 eggs and exchanged the chicks for 20,000 kg
of feed and one small used incubator that is worth 5 eggs
and that could be used for 5 more years at the beginning
of the year
slaughtered 1ostrich mid-year and exchanged for bird feed
hens laid 277 eggs during the year. She used 45 eggs to
purchase more bird feed, gave 25 eggs to the helpers, 2
eggs to the veterinarian, and 50 eggs to her father
Her portable shelter became unusable due to a very active
animal. She got a new shelter, and gave one egg and
promised to give one more egg next season
Financial Accounting
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End of the year-Younger
At the end of the year, she exchanged her
remaining eggs for 18 pairs of ostriches of
the same breed as hers
Financial Accounting
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During the year: Younger
feed purchased:
fr hathed eg
from meat
from eggs
beginning
20 eggs
9 eggs
45
63 eggs
available:
used *
ending balance
137 eggs
119.7 eggs
17.3 eggs
*63 eggs +56.7 eggs
Financial Accounting
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feed:
first 6 mo
ost
per day
days
eggs
10
35
180
63000
63
second six months
ost
9
kg
per day
35
days
180
kg
56700
beg bal waste
0
kg
used
56700
eggs
56.7
Financial Accounting
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During the year: Younger-2
eggs used:
18
25
2
1
45
10
50
pairs
8
helpers
vet
shelter payment
feed
hatched
father
Financial Accounting
144
25
2
1
45
10
50
277
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End of the year- Younger
ostrich
feed
land
incubator
shelter
number eggs
9
18
1
4
8
21
2
tot eggs
36
144
180
17.3
30
21
2
250.3
Financial Accounting
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Comparison- Beginning of the
year:
total egs
Older
Younger
ostrich
80
40
land
60
30
incubator
16
16
126
63
feed
shelter
2
2
284
151
Financial Accounting
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Comparison – End of the year
total eggs
older
ostrich
269
feed
9.7
younger
180
17.3
land
60
30
Incubator
16
16
4
2
Shelter
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358.7
Owes: 2 eggs
250.3
1 egg
Financial Accounting
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Which one is doing better?
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What about the eggs given to the father?
Which daughter is using the resources
more efficiently?
Who has increased the wealth more?
Financial Accounting
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Wealth
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Older Beginning 284 eggs
End
356.7 eggs (owe 2 eggs)
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Younger Beginning 151 eggs
End
249.3 eggs (owe 1 egg)
How much is the net worth or capital or
owners’ equity?
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Financial Accounting
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Increase in wealth
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Difference between the beginning and the
ending capital
Older: 72.7
Younger 98.3
Now let’s see what caused the capital
increase….
Financial Accounting
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Older –Annual Performance
meat produced
eggs
total revenue
cost
ostrich
9x4
feed
Cost
gross margin
81
300
help
vet
broke
fix
total expenses
income
gave to father
45
3
2
2
381 eggs
36
195.3
231.3
149.7
Increase
Financial Accounting
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97.7
25
72.7 eggs
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Younger-Annual Performance
hatched eggs
meat
eggs
total revenue
ostrich
feed
hatched eggs
shelter eggs
20
5
25
9
277
311
4
119.7
10
Cost
gross margin
help
25
vet
2
shelter unusable
2
total expenses
income
gave to father
Increase
133.7
177.3
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148.3
50
98.3
Financial Accounting
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Moral of the Story
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We need a common measurement – money
Period is important – a year from now older
might be better
Entity is different than the owner
Each financial statement answer a different
question
Balance sheet: how resources are allocated
Income Statement : how efficiently the resources
are used.
Financial Accounting
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