Cathy Cattlehand currently has a 100 cow cow-calf operation. She is considering switching to stocker steers. Fill out the partial budget to see if this is a good idea. Cow calf information: 90 surviving calves are born each year; 10 are held as replacements, and 80 are sold. Calves are sold at $620 each. Each year 9 cull cows are sold for $980 each. Variable costs of production total $40,000 per year, not counting variable interest. You should calculate interest on half the variable costs at 5%. Cathy values her cows at $1,200 each. Use an interest rate of 5% on the full value of the cow herd as a fixed cost. (Since she raises her own cows, there is no depreciation.) She insures the cows at $4.00 per head. There are no property taxes on the cows.

Stocker information: 

Cathy would buy 200 weaned calves at $600 each and put them on pasture. At the end of six months, she would sell 198 of them for $1,100 each. (There is a 1% death loss.) Production expenses (other than purchasing the calves) for this operation would total $100,000, not counting the variable interest. 

Calculate the variable interest (5%) on all variable costs (initial stocker cost + production costs) for six months.

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