MGMT 8615M Week 4 Commitment Costing Example

What the Cage-Free Pledge Still Costs: A Commitment Costing for a Food-Service Company's 2028 Egg Target, Each Input Typed as Company-Reported, Government-Reported or Assumed, With a Range From the One Input That Moves

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Walden University

MGMT 8615M: Financial Corporate Social Responsibility and Ethics

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Month Day, Year

What the Cage-Free Pledge Still Costs: A Commitment Costing for a Food-Service Company's 2028 Egg Target, Each Input Typed as Company-Reported, Government-Reported or Assumed, With a Range From the One Input That Moves

The Obligation, Stated Exactly

Larkhaven Dining Services, a composite contract food-service company that runs cafeterias for universities, hospitals and corporate campuses in the United States, states in its 2025 responsibility report: "By the end of 2028, 100 percent of the shell and liquid eggs we purchase in the United States will be cage-free." The pledge covers shell and liquid eggs, not eggs already contained in purchased products such as baked goods, and it applies to U.S. purchases only. This costing asks what remains to be paid to meet it, and who will pay.

The Costing Table

[after]

Every row names its publisher or labels itself as calculated or assumed, so a reader can rebuild the total.

Table 1

Incremental Cost of Completing the Cage-Free Pledge

A Publisher for Every Row

Two inputs come from Larkhaven itself: the volume of eggs it buys and the share already converted. Both appear in its responsibility report, and the progress figure has been reported annually since 2020, rising from 31 percent. The deadline comes from the pledge's own words. The premium is the only input not reported by Larkhaven, and it is the one that moves the total.

The Input That Moves

The wholesale premium of cage-free over conventional eggs varies over time with feed costs, avian influenza outbreaks that cut supply and the pace of conversion across the industry. The U.S. Department of Agriculture's Agricultural Marketing Service publishes weekly wholesale price reports for both categories (Agricultural Marketing Service, 2026), and a final version of this costing should average those reports over a stated period. Pending that, the table uses an assumed range of $0.25 to $0.70 per dozen, labeled as an assumption. The prose defends one connecting assumption: that the premium persists near its recent average through 2028. If industry conversion continues, the premium may narrow as cage-free supply grows; if conversion stalls, it may widen.

Demand Behind the Premium

The premium's persistence also depends on demand. Lusk (2019), surveying more than 2,000 U.S. egg consumers, found that half were willing to pay no more than about $0.30 a dozen extra for cage-free eggs, while the mean willingness to pay was $1.16, driven by a minority willing to pay much more. He concluded that pledges by large buyers, not consumer demand alone, were driving conversion. For Larkhaven, whose clients rather than individual consumers choose menus, that means the premium is unlikely to be passed through easily.

Who Absorbs the Increment

At the middle estimate, Larkhaven faces about $9.6 million in cumulative incremental cost through 2028 and about $6.4 million a year afterward. Its contracts with clients fall into two types. Cost-plus contracts, about 40 percent of revenue, pass food cost increases to clients, so universities and hospitals would absorb that share through higher dining charges. Fixed-price contracts, about 60 percent, leave the increment with Larkhaven until renewal. Norwood and Lusk (2011) noted that animal welfare standards raise costs that are ultimately shared among producers, retailers and consumers in proportions set by market power. Here the split is set by contract type: about $2.6 million a year falls on clients and about $3.8 million on Larkhaven's margin, at the middle premium.

A Check on the Range

The range can be tested each quarter. Larkhaven's purchasing team records the price it actually pays for cage-free and conventional eggs, and comparing that realized premium with the assumed range would show within a year whether the middle estimate is too high or too low. If the realized premium falls outside the range, the costing should be rebuilt with the realized figure.

What the Costing Does Not Include

The costing excludes eggs in purchased products, which the pledge also excludes, and any administrative cost of verifying supplier compliance.

References

Agricultural Marketing Service. (2026). Egg markets overview [Weekly market report]. https://www.ams.usda.gov/market-news/egg-market-news-reports

Lusk, J. L. (2019). Consumer preferences for cage-free eggs and impacts of retailer pledges. Agribusiness, 35(2), 129-148. https://doi.org/10.1002/agr.21580

Norwood, F. B., & Lusk, J. L. (2011). Compassion, by the pound: The economics of farm animal welfare. Oxford University Press.