Jaden McCoy operates a dairy goat farm in Soddy-Daisy, Tennessee and is considering to expand the rental of his goats for land clearing. Earlier, he successfully bid on a job to clear a segment of property at a neighboring resort and the goats performed very well as expected but he earned a small profit. As a result, the owner asked McCoy if he could rent his goats for clearing more sections of the said property.

After this proposal, McCoy started thinking on it and summarized some calculations for revenues and expenses related to the offer which showed a modest profit of US$120.70 for the seven days when goats were on job. This profit was not very large for him but he was intrigued by the opportunity to complement his earnings from dairy farm.

Location:

Soddy-Daisy is situated in the slopes of misty mountains, so the land in the surrounding area is normally better suited to goats than to humans. Goats have proven effective in controlling the feast of Kudzu which is a fast growing vine prevalent in southern states. Governments have considered the goats as cost effective, ecologically sensitive way to uphold large areas which are difficult to grasp belongings within authorities. Renting goats to local government to device noxious weeds provided a nearly unexploited market for thebusiness. Tennessee has successfully used goats to control Kudzu earlier and included US$20,000 in its budgets for2010-2011for hiring goats. McCoy believed that his initial success will lead to more land clearing work at the resort. One advantage is that goats are able to eat all undesired plant in all seasons throughout the year.

Revenues and Costs:

The capacity of his existing trailer is 25 goats each day and he bid $375.00 per calendar day for a whole day.He rented his goats and the owner was charged $375 rental per day even if the goats work for half day. It takes 7 days for the goats to complete one-acre job site at the resort. McCoy has hired a shepherd and a dog to accomplish work such as erecting a covered area, a water trough, a mineral lick and fencing to enfold the sight. Shepherd will load the goats in trailer and head to the resort site then take them back to the McCoy's dairy farm daily. During the day, shepherd and dog will make sure that the goats are saved from predators and are not lost anywhere from the site and the shepherd will get $190 per day for his job. A summary of the costs related to the project are presented in exhibit 1. McCoy realized that to gain higher margins, he would have to come up with constraint of the capacity for 25 goats replacing to 32 goats who will finish each project more quickly, so a new and larger truck would be required to purchase. This will cost McCoy about $24,475 including the taxes and other expenses having residual value of $2500 at the expiration of its life. He will sale his existing truck with no salvage value immediately for $500. Buying new truck and using it for goat rental operations would increase the rentals from $375 to $480 and 305 increased capacities for goats than existing trailer. Variable costs include transportation and shepherd and dog charges totaling about $240 per day while fixed costs including setup and fencing charges summed as $821.5 per project.