Rogers Case

Debeaking

1) Maintaining 100 birds: 100 x $2.61 (total laying stock cost) x $7.04(annual feed costs) = $1,837.44

Agree

2) Replacing 9 birds at 9% mortality rate: 9 x $2.61 x $7.04 = $165.37

Diferrence  If the bird is replaced then we own one bird for the whole year and its cost of feed is already taken in (1) above

Hence the mortality cost is only 9 birds * 2.61 = 23.49/100 birds

3) Labor costs: $7.50hr x (100/220) = $3.40

Agree

4) Lost production from debeaking= (22 dozens per year/56 weeks) = .39 dozen a week

100 x .39 = 39 dozens lost per year

39*$.03profit=$1.17 lost profit per 100 debeaked birds and

Difference  loss is 1 egg for 5 months making it 1/5 egg per month = 12/5 egg per year = 2.4 egg per hen = 24 eggs per 100 hen , cost per dozen = 50 ct , so loss is $1 per year for 100 hen

5) lost production from 9 dead birds = (9 x .39 x $.03profit) = $.11

Difference  The bird is replaced hence we will double count this.

Same logic for calculations below.

TOTAL COST per 100 birds per year = 1,837.44 + $165.37 + $3.4 + $1.17 +$0 .11= $2007.49

TOTAL COST per bird per year= $2007.49/100=$20.07

Costs of lens per 100 birds

1)Maintaining 100 birds: 100 x $2.61 x $4.19 (***reduced annual feed costs, $7.04-$2.85) = $1,093.59

****reduced feeding costs = $0.78 saved per day per 100 birds , .78/100=.0078 saved per day per bird x 365 days=$2.85 per year

2)Replacing 4.5 birds at 4.5% mortality rate: 4.5 x 2.61 x4.19 = $49.21

3)Labor costs:$7.50hr x (100/220)=3.4

4)Regained profit from not debeaking=$1.17

5)lost production from 4.5 birds = (4 x 22(dozen eggs) x .03) = $2.64

TOTAL COST per 100 birds per year: $1,093.59 + $49.21 + $2.64 - $1.17=$1,144.27

TOTAL cost per bird per year= $1,144.27/100=$11.44

DIFFERENTIATION VALUE: $20.07 - $11.44 = $8.63

VALUE PRICE (max price) =$20.07 + $8.63 = $28.7