homework42006 - Homework 4 Name _ ENTERPRISE BUDGETING I....

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AGEC 5010; Spring 2004; Homework 8; Page 1 Homework 4 Name ___________________ ENTERPRISE BUDGETING I. 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 Annual Insurance 1. Tractor $150,000 $45,000 6 yrs. $65 $150 2. Chisel $17,600 $ 6,000 6 yrs. $20 $ 45 3. Disk $18,800 $ 7,500 6 yrs. $20 $ 45 4. Grain drill $19,800 $ 5,700 6 yrs. $20 $ 55 5. Pickup $19,700 $ 3,800 6 yrs. $95 $620 B. MACHINERY CALCULATIONS - AVERAGE ANNUAL FIXED COSTS (Use 8% opportunity cost for capital .) Depreciation Interest Taxes Insurance Tractor Chisel D i s k Grain drill Pickup TOTALS Cost per acre C. OTHER INFORMATION 1. Expected yield 35.0 bu per acre 2. Selling price $ 3.25 per bu. 3. Labor cost - preharvest $ 7.80 per acre 4. Land rent $27.50 per acre 5. Fertilizer cost $16.50 per acre 6. Seed cost $15.00 per acre
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C. OTHER INFORMATION (CONT.) 8. Tractor variable cost $8.20 per acre 9. Variable cost on other mach. & equip. $ 3.65 per acre
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homework42006 - Homework 4 Name _ ENTERPRISE BUDGETING I....

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