Introduction
A problematic issue impacting Haiti’s humanitarian relief efforts is why local peanuts are more expensive than those imported elsewhere. Humanitarian groups like UNICEF want to buy locally supplied peanuts to manufacture Medika Mamba, a dietary supplement essential for reducing child malnutrition in Haiti and assisting regional farmers (Hasanagic, 2020). However, a significant barrier is posed by the price difference between domestic and imported peanuts. The three leading causes of this price difference will be examined in this essay: agricultural illnesses that contaminate crops with aflatoxin, small-scale production with constrained economies of scale, and a lack of contemporary equipment. We seek to shed light on the challenges humanitarian groups face in their mission to support disadvantaged individuals and local agricultural economies by examining these aspects in greater detail. By doing so, we hope to understand the underlying reasons behind the higher price of local Haitian peanuts.
What circumstances cause local Haitian peanuts to be more expensive than those produced in foreign countries?
Humanitarian aid groups like UNICEF would like to purchase Medika Mamba manufactured using local Haitian peanuts because it would help feed malnourished children and generate income for Haitian farmers. However, the humanitarian aid groups find it more expensive to source local Haitian peanuts than to import peanuts from foreign countries with advanced economies. Three significant circumstances contribute to the costly cost of local Haitian peanuts (Krumwiede et al., 2018). The significant factors include crop diseases that cause aflatoxin contamination, small-scale production that leads to limited economies of scale, and little to no machinery.
Consider how operating leverage and economies of scale affect the cost per kilogram.
Operating leverage is a technique used by firms to compute break-even points and set the right selling price. Operating leverage affects the cost per kilogram of peanut a firm produces by increasing or decreasing. High operating leverage shows that a firm’s total fixed costs of peanuts production are higher than its total variable production costs. Thus, a high operating leverage will increase the cost per kilogram of peanuts because the firm must account for the fixed costs of whether it sells them. In contrast, a low operating cost will cause the cost per kilogram of peanuts to be low because of the decreased fixed costs.
Economies of Scale
Economies of scale affect the cost per kilogram of peanut sold by foreign suppliers and local Haitian farmers. For example, large-scale foreign peanut suppliers, such as peanut farmers in Georgia, achieve economies of scale by producing large quantities per acre. The high production of peanuts by US farmers enables them to spread the total cost of production over more output, causing a reduction in the cost per kilogram of peanut produced. In contrast, small-scale producers of peanuts, such as local Haitian farmers, need more economies of scale. The small-scale production of peanuts by local Haitian farmers is due to the high cost of fertilizer and lack of farm equipment (Krumwiede et al., 2018). The small-scale production of peanuts causes the Haitian farmers to spread the total cost of production over a small output, causing the cost per kilogram to be higher than the cost per kilogram produced by large-scale farmers in the US.
How could cost-accounting information, such as break-even and target profit analysis, help Haitian farmers like Samuel Hilaire be more profitable? (3 examples)
Samuel Hilaire is among many farmers struggling to profit from their peanut farming. However, Samuel Hilaire and other Haitian farmers can utilize cost-accounting knowledge and information such as break-even and target profit analysis to become more profitable in various ways.
For example, Hilaire can utilize break-even knowledge to determine the average amount of sales required to make profits and his average production costs. Hilaire should use the break-even information, including the selling price at the market, which is $0.61 per kg, to determine the average number of sales he should have and the average cost of production.
Hilaire’s cost of production includes:
- Rent at $100 x 10 months= $1000
- labor $830
Revenue
Number of kg multiplied by market price per kg
3000 kg x $0.61=$1830
The break-even point is when Hilaire makes a revenue of $1830
Therefore, Hilaire would be required to make sales worth more than $1830 to make a profit.
The second way the break-even information could help Hilaire would be by determining the quantity of peanuts sold. The above calculation shows that the minimum quantity of peanut Hilaire should produce is 3000kg. It shows that he must increase the quantity of peanuts produced to more than 3000kg to make a profit.
The third way cost-accounting information, such as target profit analysis, can help farmers, such as Hilaire, be more profitable. The target profit analysis can help the farmers determine the profit they should make during a specific period and the sales volume. For example, let us assume Hilaire’s target profit in a certain period is $5000, and the total costs are $ 1830. The target profit analysis will help him to determine the quantity of peanuts to produce.
The target profit equation should be:
Sp x Q=T.C + TP where S.p is selling price, Q is quantity, TC is total cost, and TP is target profit.
Therefore,
$0.61x Q=$1830 + $5000
$0.61Q=$5830
Q=5830/0.61
Q=9557 kg.
Therefore, Hilaire must produce 9557 kg of peanuts for him to make a profit of $5000
A Quantitative Cost-Benefit Analysis Of Purchasing Local Peanuts Rather Than Foreign Peanuts.
A quantitative cost-benefit analysis of buying local peanuts rather than foreign peanuts allows the identification of measurable costs and benefits associated with buying peanuts from local farmers. The measurable cost of buying local peanuts rather than foreign peanuts includes the $ 3.2 million worth of a new factory, the labor cost to cover 200 workers, and three more working in HHC’s agricultural assistance program.
The measurable benefits of buying peanuts from the Haitian farmers include that the decision enabled HHC to feed 80000 children annually due to the increased production of Medika Mamba, which ranges between 5000-8000 kg per week.
Qualitative costs and benefits, such as those affecting local farmers,
There are various qualitative costs of buying local peanuts rather than sourcing from foreign suppliers, affecting local farmers. One of the qualitative costs includes that HHC must test every batch of peanuts produced by the local farmers to ensure it is not contaminated with aflatoxin. The second qualitative cost of buying local peanuts is that the yields of local peanuts are lower than those produced in foreign countries.
Sourcing peanuts from local farmers is also characterized by various qualitative benefits. The qualitative benefits of buying peanuts from Haitian farmers include generating income for the local farmers by employing three hundred Haitian farmers. The sourcing of local peanuts has also created a market for the Haitian peanuts. Other qualitative benefits of buying local peanuts include making HHC the supplier of peanuts to aid groups such as the World Food Program and UNICEF.
The types of financial and non-financial information would help HHC lower its costs and still achieve its mission.
HHC can rely on certain financial and non-financial information to reduce costs and achieve its mission. The organization can utilize financial information, such as sourcing peanuts from cheap foreign suppliers or empowering Haitian farmers to produce more local peanuts, to help save on cost and save the lives of malnourished Haitian children from starvation and stunted development (Krumwiede et al., 2018). HHC can also utilize non-financial information, such as sponsorship from aid organizations, such as UNICEF, to lower the cost of producing Medika Mamba.
How can cost accounting help HHC meet its objectives?
Cost accounting information can help HHC meet its objectives in various ways. HHC can use cost accounting to determine the best costing system to help monitor the revenues and expenses in manufacturing Medika Mamba and distributing them to malnourished children. HHC can utilize cost accounting information to determine critical measures of performance, such as cost performance-based measures. An example of a cost performance measure HHC uses would be cost per kilogram of peanuts. The organization can also use cost accounting information to determine the financial and non-financial impacts of using local peanuts. HHC can determine the financial impacts of using local peanuts, including generating income for Haitian farmers and creating a market for the local peanuts. HHC’s non-financial impact of using local peanuts would be an improved reputation and an excellent corporate image.
Financial and non-financial measures that HHC needs to provide to donors to show how they are helping the people of Haiti
Financial and non-financial measures are essential factors that HHC should provide to donors to show how it is helping Haitians. The financial measures encompass the various measures of financial performance of HHC (Mikeladze, 2021). The financial measures can be derived from HHC’s financial statements. They can be provided to donors to help them determine the share of resources allocated to charitable objectives or the average amount of donation spent on needy Haitians.
The financial measures include the debt-equity ratio and program expense ratio. The debt-equity ratio is a financial measure on the balance sheet that shows total liabilities concerning shareholder equity. The debt-equity ratio measures the relationship between borrowed funds and total donations received by HHC. HHC’s debt-equity ratio should always be less than one for it to afford to help more Haitian people (Mitchell & Calabrese, 2019). A debt ratio greater than 1 shows that HHC has more liabilities than donations, and thus, it would not manage to help more Haitians. The second financial measure HHC should provide donors to show how it is helping the Haitians is program expense over total expenditure ratio. The program expense ratio would enable the donors to compare the direct costs of charitable activities incurred by HHC to total expenses. The financial measure would allow donors to determine how efficient HHC is in fulfilling its mission of feeding malnourished children and supporting local farmers.
Donors can rely on the financial measure to understand the amount of cash HHC might spend on purchasing peanuts needed to manufacture Medika Mamba and the cost of distributing the Medika Mamba to malnourished children. HHC can also use the program expense ratio to show donors the amount of cash spent on supporting Haitian farmers (Mikeladze, 2021). Examples of costs of supporting Haitian farmers include purchasing small tractors required by local farmers to clear the farms and pesticides to help prevent fungal diseases.
On the other hand, HHC can use the program ratio to show donors the total expenditure of its other activities that support charitable activities, which benefit malnourished children and local farmers (Mikeladze, 2021). The total expenditure of HHC activities would include expenses on administration and management or fundraising activities conducted by the organization.
Additionally, HHC should provide non-financial measures to donors to show how it is helping the people of Haiti. The non-financial measures include recorded information about the Haitians who have received food aid. The organization should provide information, such as the number of children and their specific ages, who benefitted from Medika Mamba peanut butter treatment last year (Low et al., 2020). HHC can also provide the percentage of children on Medika Mamba who have recovered within six weeks of treatment.
What performance measures must HHC provide to UNICEF to help it achieve its goals and increase its purchases of RUTF made with local peanuts?
Humanitarian aid groups and donors, such as UNICEF, are crucial in funding HHC. However, HHC should provide UNICEF with specific performance measures to help it achieve its goals and increase its purchases of RUTF manufactured with local peanuts. The performance measures used by HHC could include its mission, food quality, performance goals, and short-term versus long-term costs. HHC could provide UNICEF with its mission statement: to provide RUTF, especially Medika Mamba, to malnourished Haiti children to save them from stunted growth and starvation.
The company mission would enable UNICEF to determine HHC’s purpose or its cause, its action plan, and the impacts of the HHC’s action. The HHC’s mission statement shows its purpose is to fight for the lives of malnourished Haiti’s children. The HHC’s mission would also help UNICEF to determine the specific action plan HHC intends to undertake to achieve its purpose (Krumwiede et al., 2018). The HHC’s mission shows that the organization’s action plan is to feed and treat malnourished children using RUTF peanut butter medicine. The HHC’s mission would allow UNICEF to determine the impacts of the HHC’s action: to save the malnourished children’s lives and help them grow healthy.
HHC could also provide UNICEF with food quality as a performance for it to achieve its goals and increase its purchases of RUTF made with local peanuts. HHC could provide UNICEF with details about the quality of RUTF peanut butter medicine it feeds the malnourished Haitian children. According to HHC, RUTF, especially the Medika Mamba, is a high-quality peanut- medicine that contains roasted peanuts, sugar, powdered milk, cooking oil, minerals, and vitamins (Aboramadan et al., 2021). The high-quality Medika Mamba is more effective in treating malnourished Haitian children than older milk-based treatment, considering 85% of recovery among children.
The food quality would enable UNICEF to determine the effectiveness of RUTF in treating malnourished Haitian children. Once UNICEF determines that the RUTF peanut butter medicine is high quality, it will be convinced to support HHC to save the lives of malnourished Haitian children (Krumwiede et al., 2018). High food quality would also convince UNICEF to support HHC with a significant amount of finance that would enable HHC to increase its purchase of RUTF manufactured with Haitian peanuts.
The third performance measure HHC can provide UNICEF to help it achieve its goals and increase its purchases of RUTF made with Haitian peanuts is performance goals. HHC’s Performance goals include helping the needy Haitian children fight malnutrition and helping the Haitian farmers generate income. HHC should provide UNICEF with details of the Haitian children who have benefitted from RUTF, especially Medika Mamba, given to treat malnutrition.
HHC should also provide UNICEF with details showing how it has helped Haitian farmers generate income from peanut farming. The organization should disclose its contributions to local peanut farming, such as purchasing a tractor and pesticides to help fight fungal diseases causing aflatoxin in peanuts (Krumwiede et al., 2018). HHC should disclose to UNICEF that its contribution to local peanut farming has enabled Haitian farmers to increase the peanut yield by two times what they had a few years ago and lower the cost per kilogram of local peanuts in the market. The disclosure would provide UNICEF with reliable information to help finance the HHC’s budget and plans to help farmers grow the amount of peanuts needed to make Medika Mamba.
The best way to help the people of Haiti
Urgent interventions are needed to help the country and the people of Haiti develop and live quality lives. The interventions should aim at eliminating poverty among the Haitians. Various macroeconomic, microeconomic, and ethical implications should be considered when deciding how to help Haiti and its people. For example, HHC should persuade UNICEF to think of more long-term solutions. HHC should persuade UNICEF to help it develop nutrition programs as a preventive measure against all forms of malnutrition affecting Haitian children. The nutrition programs would help HHC to prevent malnutrition by enhancing Haitian children’s access to affordable, nutritious, sustainable, and safe diets.
Another intervention HHC should consider to help the country of Haiti and Haitians would be to expand its capacity to produce more Medika Mamba in Haiti. HHC should increase the production of Medika Mamba by establishing additional factories equipped with modern production equipment (Krumwiede et al., 2018). The additional factories would allow HHC to produce more kilograms of Medika Mamba and create more employment for the Haitians. The additional factory would also create additional markets for the local peanuts, allowing farmers to sell large quantities.
The third way HHC should consider helping Haiti and its people is to reduce the food aid provided to Haitians and provide more non-food aid. HHC should reduce the food aid to Haitians by supporting Haitian farmers to grow crops on their fertile soils (Hasanagic, 2020). HHC can support farmers by providing them with machinery, fertilizers, crops, and agricultural information needed to grow quality crops in their farms. Increased food production in Haiti would reduce the amount of imported food aid to Haiti.
HHC should also consider helping Haiti and Haitians provide more non-food aid. HHC should partner with other UN agencies, such as WHO and OPAD. HHC’s partnership with WHO would enable it to promote the health of Haitians using science-based programs and policies. A partnership with OPAD would enable HHC to implement poverty eradication projects in Haiti (Hasanagic, 2020). Examples of poverty eradication projects in Haiti would include economic development, education, and income distribution projects aimed at improving Haitians’ income and sources of life (Hasanagic, 2020).
Conclusion
In conclusion, the price difference between domestic peanuts produced in Haiti and those imported from other nations is a substantial challenge for aid agencies like UNICEF. The contamination of crops by aflatoxin owing to crop diseases, small-scale production’s constrained economies of scale, and a lack of contemporary machinery are all factors in the higher price of local peanuts. Cost-accounting data, such as break-even and target profit analyses, can be crucial in addressing this problem and assisting Haitian farmers like Samuel Hilaire. Farmers can increase profitability using these tools to evaluate the best production quantities, costs, and profit margins. Additionally, a quantitative cost-benefit analysis of choosing domestic peanuts over imported ones can offer a thorough understanding of the economic effects of such choices. In order to accomplish their goals, organizations like HHC must show donors and stakeholders both financial and non-financial indicators of their effectiveness in assisting the Haitian people. To solve the complex problems facing Haiti and its people, it is crucial to consider short-term and long-term measures, such as fostering local agriculture, increasing production capability, and transitioning toward non-food aid efforts.
References
Aboramadan, M., Dahleez, K. A., Farao, C., & Alshurafa, M. (2021). Performance measurement and NPOs’ effectiveness: Does internal stakeholders’ trust matter? Evidence from Palestine. Benchmarking: An International Journal, 28(8), 2580–2602.
Hasanagic, A. (2020, July 9). 25 organizations dedicated to fighting poverty. Human Rights Careers. https://www.humanrightscareers.com/issues/organizations-dedicated-to-fight-poverty/
Krumwiede, K. R., Paik, G. H., & Walden, W. D. (2018). Can management accounting help aid associations make tough choices in Haiti? Issues in Accounting Education Teaching Notes, 33(1), 1-16.
Low, M., Farrell, D., & Sharma, U. (2020). 7 Charities’ Accountability–Financial and Non-financial Reporting Disclosures. African Management: Current Practice and Future Trends, 1, 147.
Mikeladze, A. (2021). Financial management role for NGOs
Mitchell, G. E., & Calabrese, T. D. (2019). Proverbs of nonprofit financial management. The American Review of Public Administration, 49(6), 649-661
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