Academic journal article Journal of the International Academy for Case Studies

Belgrove Farms Inc

Academic journal article Journal of the International Academy for Case Studies

Belgrove Farms Inc

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case focuses on the calculation and use of comparative advantage in the allocation of resources within the firm. Secondary issues involve the use of accounting techniques and statistics to complete the business decision analysis of a profit opportunity. The case also presents strategic thinking and ethical issues related to business conduct in a family firm and the effects on consumers.

The case has a difficulty of level three, appropriate for junior level courses. The case is intended to be taught in three class hours, including a class presentation by student teams. The case is expected to require a minimum of three hours of outside preparation by student teams that present a report.

This case is designed for use in an upper-division, inter-disciplinary business course. The purpose of the course is to enable students to utilize the knowledge they have gained in their lower-division core business courses that include one economics course in microeconomics and two accounting courses (one course in financial accounting and one course in managerial accounting) and one statistics course.

Specifically, the case incorporates the understanding of comparative advantage, opportunity cost and how prices affect the allocation of resources, how cost data should be used in decision making, and the calculation of expected value.

CASE SYNOPSIS

Students are faced with a factual setting that presents practical business and ethical issues. The client, Belgrove Farms, is considering changing production from standard yellow corn to genetically modified corn. The farm has four sub-divisions that vary in production of the new product. Cost data is provided by an existing proposal. Future pricing of the genetically modified corn is uncertain. Using the concept of comparative advantage, the student must choose the appropriate allocation of production among the four sub-divisions, and calculate the anticipated change in profits. Students must also consider the nature of a family firm and any strategic or ethical issues associated with the proposed change in production.

BELGROVE FARMS INC.

As a junior analyst for Benderson Consulting (Benderson), you were looking forward to an exciting career. You imagined assignments evaluating new technologies in far-off, exotic locations. As your bus traveled through the heartland of U.S. cornfields, you wondered about your job choice. Your background research, however, has changed your first impression of being assigned to an agricultural consulting engagement. You have discovered that farming is no longer a small potatoes operation. Perhaps, given the changes in the size of farming businesses in the U.S., agribusiness might be a lucrative consulting specialty.

Belgrove Farms Inc. (hereinafter referred to as Belgrove Farms) is an old, family-owned business that has acquired various smaller farms over the years and has managed to maintain a profitable business enterprise through economies of scale. So far, the firm has specialized in the production of Grade AA yellow corn. Kevin Thorp, Operations Manager for Belgrove Farms, has proposed replacing the current production of AA yellow corn with a new genetically modified (GM) variety of yellow corn (see Exhibit 1).

Robert Belgrove, CEO of Belgrove Farms, engaged Benderson to evaluate Mr. Thorp's proposal and make recommendations. Marna Kim, the Senior Financial Analyst at Benderson, has assigned your team the task of evaluating the Thorp proposal. Ms. Kim has sent your team a memo (see Exhibit 4) outlining the major points she would like your team to consider.

The firm's research staff has pulled together information regarding the new product (see Exhibit 2) and the past two year's income statements for Belgrove Farms (see Exhibit 3). Your team has a few days to review the materials and prepare its preliminary analysis before meeting with the client

Required:

Using the memo from Marna as a guide, prepare a business report to the client setting forth your team's analysis and recommendations. …

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