1, The expected value of the lenses to farmers
Total saving per hen
Using ODI, rather than debeaking, to combat cannibalism, a farmer can save the cost in four parts. Lower mortality, no egg loss, labor in efficiency and feeding in the trough with at least 3/8” deep are the main points to reduce the cost. 1), Debeaking reduces mortality from 25% to 9%. However, a test reveals that ODI lower the mortality to an average of 4.5%. The purchase cost per hen is $2.4. So, the saving is $0.108. (2.4+0.21)*(9%-4.5%) = $0.108
2), Debeaking causes the trauma resulting in one egg loss at five months. But, ODI has no trauma to the birds. And, the total cost is 50(53)₵ per dozen eggs. So, the saving is $0.1. 12/5=2.4, 2.4*0.5/12= $0.1
3), Debeaking hunts for three labors, each earning about $2.5 per hour, could debeak 220 birds per hour. Compared to ODI, it can install the lenses in about 225 chickens per hour. So, the saving is $0.001. 3.3-3.4=-.1 2.5*3/220- 2.5*3/225= $0.001
4), ODI holds the idea that food disappearance per 100 birds per day was reduced from 24.46 pounds when the feed in the trough was 2” deep to 23.68 pounds when the feed in the trough was only 1” deep. Also, at $158 per ton for chicken feed, this would represent considerable annual savings, especially for large flocks. So, the saving is $0.204. (24.46-23.68)/100*365= 2.847 pounds per year per hen
1 pound= 0.4536kg, so 2.847*0.4536= 1.2914kg per year per hen 1.2914*0.158= $0.204 (3/8* saving=.1)
Ultimately, the sum of four parts is $0.413.(0.25) Meanwhile, the minimum price is $0.08 per pair. So, the total saving is 0.413- 0.08= $0.333 By agreeing to take a 50% commission on the farmer’s saving, ODI reveals that lenses’ value is $0.1665.
2, How sensitive is this value to assumptions made? What may “go wrong” with assumptions? The costs per pair of lens
1), New world will manufacture the lenses at the price of $0.032 per pair. 2), Injection molds fee
The mold is...