Optical Distortion, Inc.

(A)
Harvard Business School Case #575-072
Case Software #XLS-227

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Table A Balance Sheet at September 30, 1974

Current assets
Cash $200,025
Patenta 103,000
Less accumulated depreciation (28,000)
75,000
Total assets $275,025

Current liabilities 0
Long-term debt 0
Stockholders' equity 275,025
Total liabilities and equity $275,025

a
At incorporation, ODI valued the contact lens for chickens
patent at $103,000 and depreciated it over its 17-year life.
Table B Projected Costs of California Regional
Office and Warehouse

Office expense
Rent, utilities, and so forth $36,000
Personnel
Regional manager 30,000
Administrative assistant 15,000
Regional technical manager 22,000
3 secretaries @ $10,000 30,000
Shipping clerk 10,000
143,000
Other expenses 53,000
Total projected annual costs $196,000
Exhibit 1 Chicken Census, 1880–1969

No. of Farms Raising Percent of All No. of

Year Chickens Commercially Farms Chickens

1880 na na 102,272,135
1890 na na 258,871,125
1900 na na 233,598,085
1910 5,580,758 na 280,410,531
1920 5,839,489 na 359,607,148
1925 5,505,617 na 409,290,849
1930 5,375,559 na 379,159,783
1935 5,833,079 na 371,603,136
1940 5,152,354 84.4 338,240,109
1945 4,900,948 83.4 433,110,674
1950 4,2l8,857 78.3 342,956,055
1954 3,418,204 71.5 375,800,447
1959 2,172,264 58.6 351,029,294
1964 1,210,669 38.3 343,167,807
1969 471,284 17.3 371,008,459
Exhibit 3 Characteristics of U.S. Chicken Farms, 1969

Flock Size 20,000–49,000

Total Farms (Sales Chickens on No of No. of Farms No. of
over $2,500) Total Farms Farms Reporting Flock Size Chickensa

States in Pacific Region

Washington 1,929 5,230,575 40 20 1,090,102
Oregon 1,825 2,249,752 13 13 414,220
California 3,023 46,203,988 320 320 9,517,453
Alaska 25 25,617 0 0 b

Hawaii 90 1,069,618 8 8 255,000

Pacific Region Total 6,892 54,779,550 381 361 11,276,775

Other Regions
New England 2,621 17,265,305 135 128 3,660,578
Middle Atlantic 12,867 31,036,554 240 240 6,969,792
East North Central 54,429 46,650,039 339 339 9,267,919
West North Central 112,119 41,213,868 158 156 4,372,320
South Atlantic 29,971 82,176,127 860 860 24,221,265
East South Central 29,045 36,617,712 317 317 8,854,258
West South Central 31,101 46,450,783 412 412 11,876,032
Mountain 14,295 7,018,828 28 23 682,444
Total U.S 293,340 363,208,766 2,870 2,856 81,547,775
Percent of Total 100% 100% 1% 22.4%

Flock size 50,000–99,000 Flock size 100,000 and over

No. of No. of Farms No. of No. of No. of Farms No. of
Farms Reporting Flock size Chickensa Farms Reporting Flock size Chickensa

States in Pacific Region

Washington 11 11 663,378 10 10 2,085,936
Oregon 3 3 229,000 6 6 848,705
California 114 114 7,459,944 87 87 22,952,283
Alaska 0 0 b
0 0 b

Hawaii 4 0 b
12 0 b

Pacific Region Total 132 128 8,352,322 115 103 25,886,924

Other Regions
New England 31 20 1,320,796 15 13 2,974,242
Middle Atlantic 55 55 3,419,870 29 29 5,239,990
East North Central 57 39 2,631,736 22 20 3,461,252
West North Central 34 27 1,808,508 21 16 2,480,555
South Atlantic 168 155 10,085,341 70 66 12,065,486
East South Central 62 58 3,795,730 27 25 5,661,485
West South Central 77 75 5,111,151 42 39 11,264,948
Mountain 15 0 b 14 3 806,350
Total U.S. 631 557 41,566,445 345 314 74,856,267
Percent of Total 0.2% 11.4% 0.1% 20.6%

Note: The data in Exhibit 3 are not fully consistent with those in Exhibits 1 and 4 because of differences in sources and definitions.

a
The number of chickens for which flock size was reported.
b
Not reported to preserve confidentiality regarding individual farm flock sizes.
Exhibit 4 Chicken Farm Trends, 1964–1969 (in percentages)

Number of Farms Number of Chickens

Percent Percent
Flock Size 1964 1969 Change 1964 1969 Change

Under 3,200 98.5 93.8 –61.0 32.9 13.0 –61.0

3,200–9,999 1.1 3.2 –28.9 21.0 14.9 -23.4
10,000–19,999 0.3 1.7 +35.6 14.1 18.0 +38.2
20,000–49,000 0.1 1.0 +82.0 18.1 22.4 +81.2
50,000–99,999 0.001 0.2 +83.0 6.4 11.2 +89.7
100,000 and over 0.05 0.1 +50.0 7.5 20.6 +189.7
Total 100% 100% –61.0 100% 100% +6.1

Note: The data in Exhibit 4 are not fully consistent with those in Exhibits 1 and 3 because of
differences in sources and definitions. Totals may not add to 100 due to rounding.
Exhibit 5 Average Cost per Dozen Eggs Produced, 1974

Cost per dozen eggsa

Dollars (cents)

Laying stock
Purchase cost per hen $2.4
Allocation for replacing dead birds 0.21
Total laying stock cost $2.61 11.9¢
Feed
Annual feed costs per hen $7.04 32.0
Labor 2.4
Supplies, taxes, utilities and so forth 1.8
Miscellaneous adjustments
Cull sales per dozen (credit) (0.3)
Laying stock value adjustment (credit) (1.7)
Net cash and labor cost per dozen 46.1¢
Depreciation (15% average value of buildings and equipment) 1.2
Interest (8% on land, laying stock, and average value of buildings
and equipment) 1.4
Management per dozen 1.3
3.9
Total costs per dozen 50.0¢
Average price per dozen 53.0
Average profit per dozen 3.0

a
Assuming 22 dozen eggs per hen-year.