C. OTHER INFORMATION (CONT.) 18. Tractor variable cost $13.20 per acre V9. Variable cost on other mach. & equip. $ 5.65 per acre VO. Custom harvesting, hauling, etc. $25.00 per acre 11. Compute interest on total preharvest costs @ 6% for 6 months. Use the information above and your machinery calculations to complete the enterprise budget on the next page, then answer the following questions. 1. With yield of 35 bu, per acre, what is the break-even selling price? Ans. 4.72 If the selling price was only $4.85 per bu., what per acre yield would be necessary to break. even? Ans. If the expected yield was only 30 bu. per acre, what selling price would be required to just break-even on the operation? Ans. According to your budget, what is the Cost of Production per bu.? Ans. Would you sign this lease and purchase the machinery? WHY? No, won't cover all my costs 6. If you had already signed the lease and purchased the machinery, how low must the price of wheat fall before you should stop production? Ans. AGEC 308, Fall 2019 Due: Thursday, November 14 at 2:30 PM Homework #4 Enterprise Budgeting (25 points) Assume you have a chance to rent 1,000 acres of cropland for 6 years. You can raise only wheat. Your problem is to develop an enterprise budget to see if this venture will be profitable before you sign the lease and purchase the necessary machinery. A MACHINERY NEEDED (Use only for the 1,000 acres of wheat.) Machine Cost Salvage Value Useful life Annual Taxes 1. Tractor 2. Chisel 3. Disk 4. Grain drill 5. Pickup $150,000 $17,600 $18,800 $19,800 $19,700 $50,000 S 6,000 $ 7.500 $ 5.700 $3,800 6 yrs. 6 yrs. 6 yrs. $65 $20 $20 Annual Insurance S150 $45 $ 45 $55 S620 6 yrs. 6 yrs. $20 $95 B. MACHINERY CALCULATIONS - AVERAGE ANNUAL FIXED COSTS (Use 8% opportunity cost for capital.) Taxes Insurance Tractor 50 Chisel Disk Grain drill Pickup TOTALS Cost per acre Depreciation Interest straight line) 16.666.66 8.000 1.933.33944 1.883.33 1052 12.350 1,020 12.650 940 25.483 32 11,956 225.48 $11.956 20 20 20 95 45 45 55 620 915 30.915 5110 22 C. OTHER INFORMATION 1. Expected yield 2. Selling price 3. Labor cost - preharvest 14. Land rent V5. Fertilizer cost 6. Seed cost . Chemical cost 35.0 bu. per acre $ 5.25 per bu. $9.80 per acre $47.50 per acre $26.50 per acre $25.00 per acre $ 12.75 per acre C. OTHER INFORMATION (CONT.) 18. Tractor variable cost $13.20 per acre V9. Variable cost on other mach. & equip. $ 5.65 per acre VO. Custom harvesting, hauling, etc. $25.00 per acre 11. Compute interest on total preharvest costs @ 6% for 6 months. Use the information above and your machinery calculations to complete the enterprise budget on the next page, then answer the following questions. 1. With yield of 35 bu, per acre, what is the break-even selling price? Ans. 4.72 If the selling price was only $4.85 per bu., what per acre yield would be necessary to break. even? Ans. If the expected yield was only 30 bu. per acre, what selling price would be required to just break-even on the operation? Ans. According to your budget, what is the Cost of Production per bu.? Ans. Would you sign this lease and purchase the machinery? WHY? No, won't cover all my costs 6. If you had already signed the lease and purchased the machinery, how low must the price of wheat fall before you should stop production? Ans. AGEC 308, Fall 2019 Due: Thursday, November 14 at 2:30 PM Homework #4 Enterprise Budgeting (25 points) Assume you have a chance to rent 1,000 acres of cropland for 6 years. You can raise only wheat. Your problem is to develop an enterprise budget to see if this venture will be profitable before you sign the lease and purchase the necessary machinery. A MACHINERY NEEDED (Use only for the 1,000 acres of wheat.) Machine Cost Salvage Value Useful life Annual Taxes 1. Tractor 2. Chisel 3. Disk 4. Grain drill 5. Pickup $150,000 $17,600 $18,800 $19,800 $19,700 $50,000 S 6,000 $ 7.500 $ 5.700 $3,800 6 yrs. 6 yrs. 6 yrs. $65 $20 $20 Annual Insurance S150 $45 $ 45 $55 S620 6 yrs. 6 yrs. $20 $95 B. MACHINERY CALCULATIONS - AVERAGE ANNUAL FIXED COSTS (Use 8% opportunity cost for capital.) Taxes Insurance Tractor 50 Chisel Disk Grain drill Pickup TOTALS Cost per acre Depreciation Interest straight line) 16.666.66 8.000 1.933.33944 1.883.33 1052 12.350 1,020 12.650 940 25.483 32 11,956 225.48 $11.956 20 20 20 95 45 45 55 620 915 30.915 5110 22 C. OTHER INFORMATION 1. Expected yield 2. Selling price 3. Labor cost - preharvest 14. Land rent V5. Fertilizer cost 6. Seed cost . Chemical cost 35.0 bu. per acre $ 5.25 per bu. $9.80 per acre $47.50 per acre $26.50 per acre $25.00 per acre $ 12.75 per acre