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Swan Valley Farm Business Report

Autor:   •  October 21, 2015  •  Case Study  •  525 Words (3 Pages)  •  587 Views

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Swan Valley Farm Business Report.

Revenue on sale

Swan Valley Farm business entity should make precise decisions as per the variance report analyzed.

Trends:  according to the economic trends on the sale of dried apricots the highest revenue is achieved by the company by selling apricots with 20 tons and furthermore 20 tons has the highest probability of purchase occurrence by the Kellogg’s food store. Also using the historical share prices, the Swan Valley Farm business is able to predict the stream of future revenues on the sale of 30 ton variety.

 The company should base their decision on trend analysis of the revenue and cost of production before they sign the contract with the growers. General food store has higher demand and revenue compared with Kellogg’s hence a major customer in the supply.

 Given that the two companies i.e. Kellogg’s and General Food are operating in the same asset-liabilities level the Swan Valley Farm will tend to prefer signing a contract with the growers on investment portfolio to produce 20 tons and 30 tons of dried apricots. This is because from the revenue analysis it’s indicates that it has high chance of probability of demand by the Kellogg’s and General Food company since despite its increase in cost of production  it still has the highest return on equity compared with compared with of 10 tons and 20 tons only. The company should put more consideration on the return on equity ratio, since its need an investment that can earn them highest return. Also on consideration of short run and long run results Swan Valley seems to be a stable company i.e. has not reached its maximum profit level hence room for production increase. This means in the short run will be having stable profit, return on asset and high profit margin.

Cost of production

Production cost is not a critical decision since it’s a dependent factor on the equivalents units produce and the physical units. Both the cost of equivalents units and the physical units are fixed and constant e.g. purchase apricots at $0.15 per pound; it costs an additional $0.02 to produce one pound of dried apricots. So when the company decides to produce they can easily assign cost to the units produced.

Possible events

There are assumptions risk that Swan Valley Farm will have to put into consideration in order to match demand and supply in cereal industry. First assumption is that in cases where by Swan Valley dries more apricots than its two customers demand, it will sell the surplus dried apricots to a food wholesaler at a price of $1,100 per ton, plus delivery. It’s an assumption since the market demands is based on the probability of occurrence as well as food wholesaler will always buy dried apricots. Another assumption is that If Swan Valley produces fewer dried apricots than the two cereals manufactures demand, it can purchase additional dried apricots from a competitor at a price of $1,400 per ton. The business will have to assume that the competitor will be having the dried apricots when need and at the said price.

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