Case Analysis Black River Farms

In recent years, the Black River Company has faced rising costs and declining price for its cows. Looking at the prices of cows, it can be seen that their price trend has been deteriorating since 2014. On the other hand, it has been believed over the years that the higher-weight cows produce larger calves, which can then make a good profit from their sale for the company. However, the analysis shows that the Black River Company has a negative profit margin. Therefore, one of the problems for the company is determining the right weight for cows and achieving a positive contribution margin. Since heavier cows have higher forage, supplements, and mineral costs, estimating the most profitable size of cows plays a vital role in bringing the company into better financial condition. Based on this analysis, they will be able to determine which weight category is the most appropriate and profitable, and accordingly they will be able to manage and control their costs. In the remainder of this report, we first look at cost drivers of the company, then propose the best weight for cows to achieve a positive contribution margin, and finally calculate the company breakeven point.