Question

Using the information from your enterprise budget calculate the following (Round to the nearest hundredth).

a) Cost of Production

b) Gross Margin

c) Break-Even Price

d) Break-Even Yield

Now, you're trying to decide whether you want to keep producing corn or instead switch to soybeans.

Using the information below, setup a partial budget. Will you switch?

Your expected price and yield for soybeans are $7.00 and 20,000 respectively.

Soybeans require additional labor. You would need to hire an additional 600 hours at $13

per hour.

Answer 1

a.Cost of production

Actual Cost Of Producing soyabean = (Expected price*yield of soyabean) + (additional labour cost *additional hours)

= (7*20000) + ( 13*600)

= 140000+ 7800 = 147800

b. Gross Margin

Lets calculate price per yield of soyabean

= 147800/20000 = 7.39

Assuming gross margin as 25%

= 7.39+(7.39*50/100) =11.085

Gross margin for 20000 yield of Soyabean = 11.085*20000 = 221700.

c.Break even Price

Selling without profit at 25%

= 7.39+(7.39*25/100) = 9.23

d.Break Even Yield

= 20000/9.23 = 2,169.