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Modern Agricultural Farm: Budgeting for Control

Muntazar Bashir Ahmed

Product #:9B13B025
Supplier:Ivey
Discipline:Accounting, International Business, Operations Management
Setting:Pakistan, 2012
Details:Case (PDF) • 8 pages • 2014-01-10 (Rev: 2014-04-07)

Subjects:

Finance and investingBusiness managementAccountingInternational businessOperations and supply chain management

Industries:

Agriculture sector

Geography:

PakistanAsia
Your Price:$10.54

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In May 2011, the managing partner of the Modern Agricultural Farm in rural Pakistan was reviewing the set of performance reports for the previous month sent by the farm accountant. These reports had been designed by a management analysis and research consultant to convert the farm system to that used by the head office of the Alamgir Group of businesses, of which the farm was a part. There were two concerns: how to handle the fluctuations in the farm’s monthly cash flow and how to plan the right combination of plantings and crops to ensure a profit. A computer-based accounting software program had been purchased to help expedite accounting and reporting, and an annual master budget plan had been established to control operations. Given the special risks faced in agriculture where the portfolio of crops was dependent on uncontrollable factors, such as the weather, the managing director wondered how he could develop a workable budget for the coming year.

Student spreadsheet 7B13B025 with data is available.

Learning Objectives

The case is suitable for courses on management control techniques focusing on managerial accounting and budgeting as well as for general management courses covering business planning, agribusiness programs and information systems. Its objectives are the following:
  • To teach development of a budget for a farm operation that considers the risk factors that impact farm output and suggest ways of mitigating them.
  • To prepare the cash flow for the year in a statutory format and to determine how the cash available can be sheltered from fluctuations.
  • To perform a risk analysis by evaluating the variables of each crop’s output that affect farm income.
  • To determine how the farm should select the portfolio of crops to maximize the contribution margin and thereby its profit.
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Case Study: Modern Agricultural Farm: Budgeting for Control (English version) | Ivey Publishing