A Poultry Project That Is Not Paying
A youth group runs a 200-layer chicken project in a shed near a village. They sell eggs locally. After six months the group believes it is making a profit because money is in the bank, but they cannot say what the birds cost. Records show: 200 chicks bought, 180 survived to laying; feed bought in 50 kg bags with no record of number of bags; two workers paid monthly; one disease outbreak treated by a vet; eggs sold in crates with some recorded on scraps of paper. Some eggs are cracked or eaten, and a few birds have died recently with no post-mortem. The group wants a loan to double the flock.
1. Explain why the group cannot tell whether the project is profitable, and what records are missing.
Read the worked answer
The group is confusing cash in the bank with profit. Profit is income minus all costs, including costs not yet paid and costs in kind. Missing records include: number and cost of feed bags (the largest cost), chick purchase cost, labour, veterinary and drug costs, mortality and culling, egg production and sales by grade, cracked and unsaleable eggs, and any home consumption or gifts. Without a flock register, a feed record, an egg production and sales record and a cash book, the group cannot calculate cost per egg or per bird, so a bank balance may simply reflect unpaid bills or unsold stock. Doubling the flock on this basis would multiply an unknown loss.
2. Calculate what the group must record to find cost per egg, and outline the records to keep.
Read the worked answer
Cost per egg = total cost of production over a period divided by number of saleable eggs in that period. Total cost must include feed, chicks, labour, veterinary costs, bedding, water, electricity, depreciation of the shed and equipment, and an allowance for mortality. Records to keep: a daily egg production record by grade (saleable, cracked, dirty); a feed record of bags issued and dates; a flock register of birds in, deaths, culls and birds remaining; a cash book of all receipts and payments; a veterinary and medication record; and a simple monthly summary. Saleable eggs should exclude cracked and eaten eggs, which are a loss, not income.
3. Advise the group on whether to take the loan, and on the recent deaths.
Read the worked answer
Advise against taking the loan until at least three months of complete records show a positive margin per bird and a clear market for the extra eggs. If the records then show profit, the loan should be sized to the demonstrated feed and working-capital need, with a repayment plan based on egg sales. On the deaths: a few sudden deaths in layers may be from disease, parasites, cannibalism from crowding or poor ventilation, or from eating cracked eggs. The group should send a fresh carcass to a veterinary officer for post-mortem, review ventilation and stocking density, collect eggs frequently to reduce egg-eating, and isolate any sick birds. Doubling the flock before solving mortality would double the loss.