Walfarm Limited is a company in the poultry industry. Over the past year the output capacity of the firm has increased to 3,000 birds per month. The company owner Walter Opondo asked the farm manager why despite increased production he is yet to own a Land cruiser like other business owners in this field. In his analysis the farm manager must be colluding with suppliers and buyers to steal from him.

His friend Mr. Mwalya who lectures in Strathmore University advised him to seek an external auditor to check the books. An analysis of the books revealed that the company was spending 70% of all the revenues collected on animal feeds. The consulting arm of the external audit firm recommended that Walfarm Limited should find a cheaper source of poultry feeds or produce their own feeds.

The farm manager was against the idea of sourcing for cheaper feeds citing that it would lead to stunted growth, increased mortality and longer terms to maturity. Mr. Walter then took a trip to Uganda to uncover how they were able to not only produce eggs, but chicken meat cheaply. He came back with a 2 million shilling feed mill and a schedule of production.

Kuroiler Chicken Mature after four months. The schedule received from a Ugandan farmer is in line with this maturity period.

Schedule for 500 birds

Month 1

Month 2

Month 3

Month 4

Chick Mash

500 kg

750 kg

Growers Mash

1,250

Finisher

1,500

A bird requires different protein levels during its life cycle, ranging from 18% - 23%

The feed formula is as follows for a 100 kgs bag.

Chick Mash

Growers Mash

Finisher

Whole Maize

55 kgs

55

60

Fish meal

15 kgs

15

20

Sunflower

10 kgs

15

10

Rice barn

20 kgs

15

10

100 kgs

100 kgs

100 kgs

The following were the prices per kilogram of the feed components during the period.

June

July

August

September

October

Whole Maize

KES 40

KES 45

KES 40

KES 35

KES 30

Fish Meal

KES 25

KES 20

KES 25

KES 30

KES 35

Sunflower

KES 45

KES 50

KES 55

KES 50

KES 40

Rice Barn

KES 15

KES 15

KES 15

KES 15

KES 15

The budget was drawn in June and feed production started in July. The farm manager decided to buy the components required for production in the respective month of production.

During production, the farm manager realized that due to wastage and the unavailability of some of the components as and when required, the usage during the period was as follows for production of 100 kgs bag of poultry feed.

Chick Mash

Growers Mash

Finisher

Whole Maize

50 kgs

60

60

Fish meal

15 kgs

20

20

Sunflower

15 kgs

15

10

Rice barn

30 kgs

15

20

110 kgs

110 kgs

110 kgs

a)Jasmine, Manvir and Austin who are interns at the firm have been tasked to conduct a variance analysis and advice the Farm manager on how to manage costs. (10 marks)