Question

Zoe Garcia, a family farmer, wishes to expand into fresh organic milk business by purchasing 6 cows. She can purchase a head of milk cow at a price of $2110 per cow. The yield per cow averages 7.7 gallons each day. She estimates feed to cost $4.72 per day per cow. She further estimates 5.6 hours of labor per day taking caree of the operations for all the cows. Assume a labor rate of $10.55 per hour. Zoe estimated other overhead costs to run $45.90 per day. Assume that Zoe can sell mild at a price of $9.50 per gallon.  

What is the contribution margin to the fixed cost generated per day?

How many days will it take for Zoe to start making a profit from the cows?

If she wishes to make a profit after 30 days, what should be the selling price per gallon?

Answer 1