Cost of An Egg

1. Cost of An Egg

2. Class Announcements • Assignment #9 due November 21st • Assignment #10 due November 28th • Not responsible for journal entries or appendix for chapter 17 and 18 • STFX Christmas Tree lighting 6:30-8:00pm Monday November 25th, Xavier Gardens • University of Toronto, Masters of Management and Professional Accounting, Thursday, November 28th Schwartz 281 11:00 am – 1:00 pm

3. Cost of an Egg Assignment • Due: November 28, 2013 • Worth: 10% • Length: Three (3) pages, double spaced • Coverage: • Consider and identify the full scope of costs that are required in the production of an egg. Include an appendix classifying costs (5-10) as variable, fixed or mixed and direct and indirect and rationale for classification. • Consider the issues and implications of the cost allocation of infrastructure costs (i.e., indirect costs) on the cost of an egg. • Consider the impact of regulation on the supply, cost, price and profitability of egg production. Include size of production, impact of out of province production, quota, etc. • Consider the importance of inventory management, cost management and efficiency on overall cost and profitability. Inventory,

4. Cost of an Egg Assignment: Links • Nova Scotia Egg Producers http://www.nsegg.ca/ • Egg Farmers of Canada http://eggs.ca/ • Nova Scotia Egg Producers’ Egg Regulations http://www.gov.ns.ca/just/regulations/regs/npeggreg.htm • Nova Scotia Department of Agriculture http://www.gov.ns.ca/agri/industry/poultry.shtml

5. Cost of an Egg: Application • Capacity Level Indicators (9) • Inventory Management (20) • Cost Behavior (10) • Costing Approach (17) • Spoilage (18) http://eggs.ca/farmers-and-farming/journey-of-the-egg

6. Capacity Levels: Indicators • Four different capacity level indicators are: • Theoretical capacity - level at full efficiency (ideal goal; unattainable • Practical capacity – reduces theoretical capacity by unavoidable operating interruptions • Normal capacity utilization – satisfies demand over the period • Master Budget capacity utilization – level of capacity that is budgeted

7. The Cost of an Egg: Capacity • Theoretical capacity – size of barn,# cages, # hens per cage, # eggs per hen • Practical capacity – illness of hens, breed/type, age of hens, weather • Normal capacity utilization – demand, contractual obligation • Master Budget capacity utilization – changing demographics, egg marketing campaigns, etc.

8. The Cost of an Egg: Capacity • NSEP uses a supply management system to provide a stable supply of eggs to consumers at fair prices and a fair return to producers. • http://eggs.ca/farmers-and-farming/journey-of-the-egg • Inventory Management (Producer) • Inventory Management (Retailer)

9. The Cost of an Egg: Capacity • Inventory Management (Producer) • Quota • Age of chickens • Demand from retailers • InventoryManagement (Retailer) • Average demand per day/ per week • Space in cooler • Lead time for delivery • Planned spoilage

10. The Cost of an Egg: Capacity • Identify costs that Egg Producers would incur. • What behavior would those costs exhibit?

11. The Cost of an Egg: Capacity • Identify costs that Egg Producers would incur. • Grain/Feed • Electricity/Utilities • Insurance • Transportation of Eggs/Hens • Staff • What behavior would those costs exhibit? • Variable • Fixed • Mixed • Non-linear

12. The Cost of an Egg: Costing • Egg producers produce different sizes of eggs, different grades of eggs, different color eggs, different types of eggs (e.g. omega), etc.

13. The Cost of an Egg: Costing • Egg producers produce different sizes of eggs, different grades of eggs, different color eggs, different types of eggs (e.g. omega), etc. • See http://vimeo.com/8822715 • What costing (job or order) would make sense in this environment? • Why?

14. Cost of an Egg: Spoilage • Do the concepts of scrap, spoilage, and rework apply to the egg production industry? • Spoilage—units of production, either fully or partially completed, that do not meet the specifications required by customers for good units and that are discarded or sold for reduced prices • Rework—units of production that do not meet the specifications required by customers but which are subsequently repaired and sold as good finished goods. • Scrap—residual material that results from manufacturing a product. Scrap has low total sales value compared with the total sales value of the product.

15. Cost of an Egg: Spoilage • Spoilage in egg production is defined as “cracked, yolk loose, and white thin and watery” see http://eggs.ca/egg-farming/journey-of-the-egg/making-the-grade and alternative use of spoiled units see http://eggs.ca/egg-farming/journey-of-the-egg/grading-station

16. Egg Production: Timer App • Making perfect eggs is easy with the official app of Egg Farmers of Canada. Easy to use and fully customizable, it transforms your phone into a multi-functional egg timer complete with a beautiful hourglass design. And with scores of extra features, you can take your eggs to a whole new level of deliciousness. Download it for free at the App StoreSM or Android Market Place. • http://eggs.ca/promotions/egg-timer-app