Use sensitivity analysis to determine the appropriate alternative for the following scenario:

Assume a farmer is considering switching from traditional corn production on 1,000 acres to 1,000 acres of organic corn. 

Use the following information to analyze this decision using the partial budget format.

Variable costs, including machinery (including fuel), seeds, and fertilizer, are expected to be $10.00 per acre for traditional corn.

Variable costs, including machinery (including fuel), seeds, and fertilizer, are expected to be $13.50 per acre for organic corn

Labor requirements for traditional corn are 2.75 hours per acre at $16.50 per hour.

Labor requirements for organic corn are 4.5 hours per acre at $16.50 per hour.

Traditional corn yields have averaged 190 bushels per acre.

Organic corn yields are expected to be 160 bushels per acre.

Traditional corn prices are expected to be $4.00 per bushel.

Organic corn prices are expected to be $6.00 per bushel.

Sensitivity Analysis for organic corn:
Increased Revenues:	Decreased Revenues:
Decreased Expenses:	Increased Expenses:
TOTAL:	TOTAL:

Net Change = (A + B) – (C + D)

Should this change be made? Why or why not based on your results.

Answer rating: 100% (QA)

Based on the information provided lets conduct a sensitivity analysis to determine if the farmer should switch from traditional corn production to org... View the full answer