Goats: The Green Alternative (B)

This case is a supplement to Goats: The Green Alternative (A). The (B) case can be used independently of the (A) case if the professor wishes to focus exclusively on capital budgeting. See also Goats: The Green Alternative (C) 9B15D001.

This case has been used in managerial accounting courses to introduce the concept of incremental revenues and costs in the context of a capital budgeting exercise. In the (A) case, students identified fixed and variable costs associated with the goat rental operation. Sufficient information is provided in the (B) case to enable students to estimate fixed and variable costs for both goat rental scenarios — for the existing truck and trailer and for a larger truck and trailer. The case provides students with the estimated initial investment and requires them to compute incremental revenues and costs associated with the capital investment opportunity. Students must first determine the expected number of goat rental jobs that can be accepted each year for the existing truck and trailer and for the larger truck and trailer. Revenues per job are based on the area to be cleared, so incremental revenues are equal to the incremental number of jobs the owner can accept each year multiplied by the estimated revenue per job. Because costs are expected to increase with a larger truck and trailer, students must also compute incremental fixed and variable costs per job and, based on the incremental number of jobs that can be completed with a larger truck and trailer, compute annual incremental fixed and variable costs. Students use the difference between incremental revenues and incremental costs in their capital budgeting analysis.

• Managerial Accounting
• Capital Budgeting
• Modeling
• Spreadsheet Application
• Capital Expenditure Analysis
• Differential Analysis
• United States