fm10 - Unit 2 Budgeting and Planning Topics to Cover ■...

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Unformatted text preview: Unit 2 Budgeting and Planning Topics to Cover ■ Enterprise Budgets (in Farm Plan) ■ Partial Budgets ■ Whole-Farm Planning (Farm Plan) ■ While-Farm Budgets (Farm Plan) ■ Cash-Flow Budgets (possibly after test 3) Budgeting Looks Forward Budgets are projections. They deal with expectations for future costs and returns from following a specific plan. Farm Management Chapter 10 Enterprise Budgeting Chapter Outline ■ Enterprise Budgets ■ Constructing a Crop Enterprise Budget ■ Constructing a Livestock Enterprise Budget ■ General Comments on Enterprise Budgets ■ Interpreting and Analyzing Enterprise Budgets Chapter Objectives ■ To define an enterprise budget and discuss its purpose and use ■ To illustrate the different sections of an enterprise budget ■ To learn how to construct a crop enterprise budge ■ To outline additional problems and steps to consider when constructing a livestock enterprise budget ■ To show how data from an enterprise budget can be analyzed and used for computing cost of production and break-even prices and yields Enterprise Budgets ■ An enterprise budget provides an estimate of potential revenue, expenses, and profit for a single enterprise ■ Each type of crop or livestock is an enterprise ■ The base unit for crops is usually one acre ■ The base unit for livestock may be one head or some other convenient size Enterprise Budgets ■ Income ■ Variable Costs ■ Gross Margin (income- vc) ■ Fixed Cost ■ Total Costs ■ Profit (income - tc) Enterprise Budget Units Enterprise budgets cover a specific unit of production for one crop or livestock undertaking. Crops: Usually one acre. Livestock: Normal a certain number (e.g. 30 cow cow-calf operation) Table 10-1 Example Enterprise Budget for Watermelons (1 acre) Item Revenue 250 cwt @ $5.50 per cwt $1,375.00 Variable Costs Seed $80.00 Fertilizer 95.50 Chemicals 97.75 Machinery expense 35.15 Custom Spray 8.00 Harvesting and Hauling 500.00 Labor 320.00 Interest @ 10% for 6 months 56.82 Total variable cost $1,193.22 Income above variable cost $181.78 Fixed Costs Machinery depreciation, interest, taxes, and insurance $62.00 Land charge 100.00 Total fixed costs $162.00 Total costs $1,355.22 Estimated Profit (return to management) $19.78 Value per acre Constructing a Crop Enterprise Budget ■ Revenue: all cash and noncash revenue from the crop ■ Operating or variable expenses: all costs that would be incurred only if the crop is produced ■ Ownership or fixed expenses: costs that must be paid even if no crop is produced...
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This note was uploaded on 11/15/2011 for the course AGEC 7100 taught by Professor Duffy,p during the Fall '08 term at Auburn University.

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fm10 - Unit 2 Budgeting and Planning Topics to Cover ■...

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