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Production Based Costing, an Animator for Market Development of Oxbow Lake Fisheries

M.H. ALAM
Aqua Culture Development Project, International Fund for Agriculture Development (IFAD), Jessore, Bangladesh

M.G. SAROWER
Fisheries and Marine Resource Technology, University of Khulna, Khulna, Bangladesh

M.A. RAHMAN
Civic Engagement Division, Transparency International Bangladesh (TIB), Satkhira, Bangladesh

M.A. ALI
Sustainable Development Associates, Bananni, Dhaka, Bangladesh

Abstract/ Executive Summary:

The main objective of the study was to prepare a cost function in a manner that the fishermen can manage the oxbow lakes with a community based approach in a sustainable way. The duration of the study covered a period of over 48 months, financial years 2000-01 to 2003-04. One privately managed oxbow lake (PMOL) named Morshina, one Government managed lake (GMOL) named Kathgora and the last but the least, community managed oxbow lake (CMOL) named Purakali lake were taken for this study. Annual income statements for each oxbow lake were prepared following Generally Accepted Accounting Principle (GAAP). Important costs were identified from the income statements. Contribution margins and percentage of contribution margins (%) were calculated by deducting the variable costs from selling price in terms of per unit (kg) carp yields. Contribution margins and percentage of contribution margins (%) were calculated to find out total profit of carp yields. The CMOL was taken as an experiment whereas the rest twos, PMOL & GMOL were taken as control groups where no support of Production Based Costing (PBC) was provided. Major ecological factors included primary production and other food availability in the water biomass, seasonal variations, carrying capacity, standard water area, fish growth, stocking mixes, and catch composition. Cost factors included operating costs, fixed and variable costs, contribution margins, break-even-points, daily income, market price and Benefit Cost Ratio (BCR). Social factors included income level and behavioral changes of the fishermen. By using a leas square regression equation cost functions of yield-kg was prepared for each oxbow lake where the value of R² was found better in CMOL in compare to the PMOL & GMOL.

Keywords: Production cost, Market development, Oxbow lake fisheries

Location: Khulna

Start Date: 00-00-2000

End Date: 00-00-2004

Program Area: Knowledge Management

Commodity: Fish

Objectives:

To take effective cost decisions by using cost functions of fish yields. Successful outcomes of this model depend on proper integration with culture based fisheries and community based fisheries management.

Methodology:

The cost function measures operating costs in terms of fixed costs, variable costs and fish yields-kg. Operating costs comprised of direct materials, direct labors and manufacturing overheads. Cost of direct materials included only the fingerling costs. Direct labor costs imply the costs paid to the fishermen as shares and equities after paying all the liabilities and expenses at the end of every operating cycle. In Purakhali oxbow lake variable costs included distribution of shares to the fishermen, fingerling costs, fingerling transporting costs, manufacturing over head costs e.g. guard salaries, costs related to crafts and gears used, costs related to establishment of pata or Komor etc. Fixed costs comprised of lease costs, interest expenses and General and administrative expenses. General and administrative costs included monthly meeting, litigation, office supply and entertainment expense.

Source of Information: j. innov.dev.strategy. 3(5): 16-17 (September 2009)

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

The quantity of fish yield-kg explains operating cost extremely well and can be interpreted as meaning that quantity of fish yield-kg explains 92% of the past fluctuation in operating cost. The value of income at the end of the operating cycles does not fit operating cost as well as cost function using fish yield-kg.

Knowledge Management: Journal