Baron Goburg

Pages: 6 (576 words) Published: May 16, 2010
Concordia University
Executive Summary

Problem/Goal Definition

The Baron’s goal is to determine which farmers’ wheat production was more efficient with respect to the resources provided to them.

Quantitative Analysis

• Bushels of wheat are used as the common denomination in this case.

• Oxen and plow are depreciable assets. According to Exhibit C and Exhibit D, both farmers’ oxen are depreciated using the straight-line method. Frederick can depreciate his plow, but Ivan cannot.

• According to Exhibit C, Ivan has a liability of 3 bushels towards the plow maker.

• As shown by Exhibit E and Exhibit F, the total wheat production was 381; sufficient to provide for all the Baron’s peasants.

• As per Exhibit G, Ivan has a 10% higher asset turnover ratio than Frederick.

• As per Exhibit G, Ivan has 31% more change in assets than Frederick.

• As per Exhibit G, both farmers have the same Gross Profit Margin.

Qualitative Analysis

• The quality of the soil in each plot of land for wheat farming has an effect on the yield.

• An ox working on a larger piece of land needs higher maintenance; hence the cost of production, including the cost of food and maintenance for the ox is higher for Ivan.

• The oxens’ actual productivity, and hence relativity to each other, according to it’s health, durability, stamina and efficiency cannot be accurately measured, and thus are only relative to each other based on class life of the animal.

Recommendation

Baron Coburg’s best farmer is Ivan. Given the resources provided to them, both farmers were able to maintain the same profit margin. However, Ivan was able to create a higher asset turnover and a higher change in assets. Baron Coburg should hire Ivan for the next harvest season based on his maximum production capability.

Exhibit A

|Balance Sheet for Ivan | | Beginning of season | | (all amounts are in bushels of Wheat) | | | | | ASSETS | | | Land | 100 | | Ox | 40 | | Seed | 20 | | Fertilizer | 2 | | | 162 | | | | | LIABILITIES | | | None | - | | | - | | |  | | | 162 | | | | | SHAREHOLDER EQUITY | | | Baron's Contribution | 162 | | | 162 |

Exhibit B

|Balance Sheet for Frederick | | Beginning of season | | (all amounts are in bushels of Wheat) | | | | | ASSETS | | | Land | 50 | | Ox | 40 | | Seed | 10 | | Fertilizer | 1| | | 101 | | | |...