Question

3. A producer is trying to justify purchasing a new electric drive system for his 12-row planter. The system will cost $22,000 to install on the planter. He is hoping to decrease his planting into headlands by 3.5%. He farms 1000 acres of corn following corn with a target rate for the seed to produce 200 bu./ac of corn. His typical average yield is 210 bu/ac of corn, the price for corn this year is $3.25 per bushel. The producer understands that when planting into headlands he loses 10% of his average yield due to double planted areas. What is the total savings for seed and yield for the first year? Round to the nearest cent

Answer 1

A) Cost

Cost of the new electric drive system = $22000

B) Revenue

Total revenue = $(1000*210*3.25)= $682500

Less :

Loss of average yield due to double planted areas = $(1000*210*3.25*10%)= $68250

Net Revenue = $(682500-68250) = $ 614250

Savings due to decrease in planting in headlands =$(210*1000*3.25*3.5%) = $ 23887.5 = $23888

Net Savings = Net revenue +Savings due to decreasein planting headlands - Cost of Electric Drive = $(614250+23888-22000) = $ 616138

Yield for first year= in revenue terms = $(1000*3.25*210*.9) = $614250

in bushels = 1000*210*.9 = 189000 bushels

where ,

Acres of land = 1000

Target produce of seed = 200 bushels /acre

Average yield = 210 bushel/acre

Price of corn = $3.25

decrease in planting in headlands = 3.5%

loss due to double planted areas = 10%