Question

16. ABC Coop buys 600,000 units of crop from its farmer members at $3.00 per unit. ABC Coop has $1,500,000 in overhead costs. The cooperative, ABC Coop, has 2,000 members. Receipts to the cooperative from the commodity it sells are $4,000,000. (10 pts) Cooperative Margin=Receipts - Crop Costs - Overhead Cooperative Margin per member= Cooperative Margin/# members Payment per Member= (Crop Costs/# members) + Coop margin per member a. What would the Cooperative Margin be? $ b. How much would each farmer member of the Farmer Coop receive back in payment? $ c. Who would pay the tax and why is this beneficial?

Answer 1

a) Coop Margin = Receipts - crop costs - overhead costs.

receipts = 4,000,000

Crop costs = 600,000 $\times$ 3 = 1,800,000

Overhead costs= 1,500,000

COOPERATIVE MARGIN = 4000000 - 1800000 - 1500000

= $ 700,000

b) Coop margin per member = coop margin/no. of members

= 700000/2000

=350

Payment received by each member = (crop costs/no. of members ) + coop margin per member

   =(1800000/2000) + 350

   = 900+350

= $1250

c) ABC Cooperative must pay the tax as an entity rather than the individual members paying it. This is so because ABC Cooperative can seek various deductions since it is engaged in agricultural activity and also it can shift the burden of taxes to the consumers by including them in the prices. The distributed Profits of cooperatives are exempted from taxation.