The Ostrich Farm

Financial Accounting 1

The Ostrich Farm


Basic Information 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


Beginning-1 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


Beginning-2 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.


Decision Which daughter is doing better? Criteria?


What do we need to answer? “performance” ownership common denominator or measurement

unit


Solution Common denominator – eggs or birds? Father or daughters? Wealth increase? How to measure?


Measurement Unit -Eggs

Ostrich Farmone pair ostrich 8 eggsone ostrich 4 eggs1km2 land 3 eggsincubator 4 ost or 16 eggsportable shelter 2 eggs1000 kg feed 1 egg100 kg meat 9 eggs


Beginning eggs total egsostrich 20 4 80land 20 3 60incubator 1 16 16feed 126000 /1000 126shelter 1 2 2

284

Older Sister

Capital –whose?


During the year- Older 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


End of the year- Older 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.


During the year: Olderfeed purchased:from meat:

9 81 eggsshelter 2purchased 79 eggs

available: 205 eggsused * 195.3 eggsending balance 9.7 eggs

*126 eggs plus 69.3 eggs


feed:first 6 mo second six monthsost 20 ost 11per day 35 kg per day 35days 180 days 180

126000 kg 69300eggs 126 beg bal waste 0

kg used 69300eggs 69.3


During the year – Older –2eggs used: eggs

25 ost.pairs 9 22545 helpers 45

3 vet 32 broken eggs 2

25 father 25300


End of the year Oldernumber eggs tot eggs

ostrich 11 4 4425 9 225

269feed 9.7land 60incubator 1 16 16shelter 2 2 4

358.7


Beginning eggs total egsostrich 10 4 40land 10 3 30incubator 1 16 16feed 126000 /1000 63shelter 1 2total 151

Younger sister

Capital –whose?


During the year- Younger 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


End of the year-YoungerAt the end of the year, she exchanged her

remaining eggs for 18 pairs of ostriches of the same breed as hers


During the year: Youngerfeed purchased:fr hathed eg 20 eggsfrom meat 9 eggsfrom eggs 45beginning 63 eggs

available: 137 eggsused * 119.7 eggsending balance 17.3 eggs

*63 eggs +56.7 eggs


feed:first 6 mo second six monthsost 10 ost 9per day 35 kg per day 35days 180 days 180

63000 kg 56700eggs 63 beg bal waste 0

kg used 56700eggs 56.7


During the year: Younger-2eggs used:

18 pairs 8 14425 helpers 25

2 vet 21 shelter payment 1

45 feed 4510 hatched 1050 father 50

277


End of the year- Younger

number eggs tot eggsostrich 9 4 36

18 8 144180

feed 17.3land 30incubator 21 21shelter 1 2 2

250.3


Comparison- Beginning of the year:

total egs Older Younger

ostrich 80 40

land 60 30

incubator 16 16

feed 126 63

shelter 2 2

284 151


Comparison – End of the yeartotal eggs older younger

ostrich 269 180

feed 9.7 17.3

land 60 30

Incubator 16 16

Shelter 4 2

358.7 250.3 Owes: 2 eggs 1 egg


Which one is doing better? What about the eggs given to the father? Which daughter is using the resources

more efficiently? Who has increased the wealth more?


Wealth Older Beginning 284 eggs

End 356.7 eggs (owe 2 eggs)

Younger Beginning 151 eggs End 249.3 eggs (owe 1 egg)

How much is the net worth or capital or owners’ equity?


Increase in wealth Difference between the beginning and the

ending capital Older: 72.7 Younger 98.3 Now let’s see what caused the capital

increase….


Older –Annual Performancemeat produced 81eggs 300total revenue 381 eggscostostrich 9x4 36feed 195.3

Cost 231.3gross margin 149.7

help 45vet 3broke 2fix 2 total expenses 52income 97.7gave to father 25

Increase 72.7 eggs


Younger-Annual Performanceshelter eggs

hatched eggs 20 5 25meat 9eggs 277total revenue 311ostrich 4feed 119.7hatched eggs 10

Cost 133.7gross margin 177.3help 25vet 2shelter unusable 2 total expenses 29income 148.3 gave to father 50

Increase 98.3


Moral of the Story 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.

Documents

The Ostrich Farm