Profit Difference and Ethical Issues In the memorandum below, Karen Lee, your team leader, has provided an outline of what you should consider and include in the preliminary analysis.
Please incorporate the answers to the questions below in your report.
To: Junior Analysts, Mercer Farms
From: Karen Lee, Senior Financial Analyst, Mercer Farms
Date: February 2, 2009
Re: Mercer Farms Inc.
Please forgive my generality, but since I don’t know at the moment who will be doing this research, I have laid out a brief outline of the major points I think should be considered in evaluating the proposal of Mr. Michael Bell, the Operations Manager of Mercer Farms, Inc.
Background: Allen Mercer, a conservative older gentleman who founded the firm, is the client. He is very proud of the firm’s commitment to quality. Michael Bell, a nephew of Mr. Mercer, was hired by him two years ago. Michael is 27 and recently graduated from a state university with a business degree.
Q. 1. Using the client’s production cost data (Exhibit 1), demonstrate the change in profits resulting from the above production recommendation for the alternative potential selling prices of GM yellow corn.
Q.2. Okay, that’s the economic analysis, but consider the nature of a family business and any strategic and ethical issues that might be important, and check with me. We want to make the right recommendation for the client.