Cost price calculation methodology for beef farms

Silina, L., Latvia Univ. of Agriculture, Jelgava; Andersons, R., Latvia Univ. of Agriculture, Jelgava

Cost price calculation methodology for beef farms

2015

Silina, L., Latvia Univ. of Agriculture, Jelgava (Latvia) | Andersons, R., Latvia Univ. of Agriculture, Jelgava (Latvia)

Quality of information about cost structure of farm is of high importance when making management and production process improvement decisions. Aggregating and analyzing production process cost information by correct and unified methodology provides possibility of evaluating the structure of expenditures. Moreover, it is possible to identify most important cost positions and get perspective on production process. By collecting and processing data using unified methodology it is possible to conduct comparing evaluation between different farms. This is done to identify the most and less efficient farms, their work methods and cost structure. When developing unified methodology, it is essential to take into account that different farms might use different production systems and structure. When creating revenue and expense calculations, it is essential to receive accurate data. Good quality data is fundamental for receiving good quality and usable results. Precise data accounting is another important factor that ensures good quality of cost calculation. Precise accounting decreases number of cost allocation coefficients used for allocation of cost positions and thus decreasing effect of assumptions on unit production cost calculation. Fixed cost allocation by its nature to divide all costs by farm specializations is the most challenging when calculating unit production cost. In order for calculations to be of good quality, precise data on use of assets, specifics and intensity of farming is necessary. By identifying these indicators it is possible to create maximally precise calculation of unit production cost of beef.

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