Sarah owns some farms in South England. She grows potatoes, cabbage, onions, and cucumber in her farms. The land that is used for potatoes and cabbage can be used for either crop but cannot be used for onions or cucumber. That land that is used for onions and cucumber can be used for either crop but cannot be used for potatoes or cabbage. In order to meet the demand of the current customers in the market, Sarah’s farm must produce at least 72 tonnes each per annum of potatoes and cabbage and at least 40 tonnes each per annum of onions and cucumber.

Sarah is now planning for the crop production for the next year. She is seeking your opinion as a management accountant in order to maximise profits. Sarah provided the following data related to the current year. Fixed overhead expenses are £58,000 per annum.

No.	Particulars	Potatoes	Cabbage	Onions	Cucumber
1	Original area occupied in farm (acres)	30	20	35	15
1	New area occupied in farm (acres)
2	Yield per acre (tonnes per annum)	12	9	10	8
3	Original selling price per tonne (£)	100	90	80	120
3	New selling price per tonne (£)
4	Variable cost per acre per annum (£): Fertilizers	30	25	45	40
4	Seeds	20	30	15	25
4	Pesticides	25	15	20	25
4	Direct Wages	400	420	380	500

New area occupied in farm (acres) would be the original acres plus (+) 1. New selling price per tonne (£) would be the original selling price plus (+) 

1. Consider all the requirements as separate and independent to each other unless specified. Show all notes and workings. Keep two decimal places for all results in your calculations. Prepare a statement showing existing operating profit for Sarah’s farm

2. Sarah is thinking to maximize her profits without disturbing the demand from current customers. Given the size of the land, how many acres of each of the 4 crops should be planted? Support your answers with calculations and notes.

3. Sarah has found a new fertilizer which can now support any crop to grow in any area of the farm. Assume that there is no need to meet the demand of the current customers in the market and hence there is no minimum quantity required for any of the crops to be produced. With these assumptions under consideration,

I. Calculate and recommend to Sarah which crop she should consider to plant to achieve the highest profitability.

II. Calculate break even point in amount (£) of sales for Sarah.

Answer rating: 100% (QA)

Answer I Determining which crop Sarah should consider planting to achieve the highest profitability No Particulars Potatoes Cabbage Onions Cucumber 1 ... View the full answer