Question

You want to develop an enterprise budget to farm wheat for 6 years to see if it is profitable. A. MACHINERY NEEDED Machine Cost 1. Tractor Annual Insurance $150 $45 2. Chisel Salvage Value $50,000 $6,000 $7,500 $5,700 $3,800 $150,000 $17,600 $18,800 $19,800 $19,700 Annual Taxes $65 $20 S20 $20 $95 3. Disk 4. Grain drill 5. Pickup $45 $55 $620 B. MACHINERY CALCULATIONS - average annual ownership costs Depreciation Interest (8%) Taxes Insurance Tractor Chisel Disk Grain drill Pickup TOTALS Cost per acre C. OTHER INFORMATION 1. Expected yield 35.0 bushels per acre 2. Selling price $5.25 per bushel 3. Labor cost (pre-harvest)$9.80 per acre 4. Land rent $47.50 per acre 5. Fertilizer cost $26.50 per acre 6. Seed cost $25.00 per acre 7. Chemical cost $12.75 per acre 8. Tractor operating cost $13.20 per acre 9. Operating cost on other machinery and equipment $5.65 per acre 10. Custom harvesting, hauling, etc. $25.00 per acre

Answer 1

Machinery Calculations

	Depreciation	Interest(8%)	Taxes	Insurance
Tractor	16667	12000	65	150
Chisel	1933	1408	20	45
Disk	1883	1504	20	45
Grain drill	2350	1584	20	55
Pichup	2650	1576	95	620
TOTALS	25483	18072	220	915
Cost per Acre

*Cost per acre can not be calculated as number of acres of farming land is not given in question.

**Depreciation is calculated assuming the life of assets being 6 years.

S.No.	Wheat Budget	Per Acre($)
I.	Revenue	183.75
	Total Revenue	183.75
II.	Operating Costs
	Preharvest
	Labour Cost	9.80
	Harvest
	Fertilizer Cost	26.50
	Seed Cost	25.00
	Chemical Cost	12.75
	Custom harvesting,hauling	25.00
	Total Operating Cost	99.05
III.	Ownership Costs
	Land Rent	47.50
	Tractor Operating Cost	13.20
	Operting on other machinery and equipment	5.65
	Total Ownership Costs	66.35
IV.	Total Costs	165.40
V.	Gross Margin Per Acre	84.70
VI.	Profit Per Acre	18.35

1.With Yield of 35 bu. per acre, the break even selling price is $ 4.726 per acre.

2.If the sellling price was only $4.85 per bu., 34.11 bu. per acre would be necessary to break-even.

3.If the expected yield was only 30 bu. Per acre,selling price of $5.52 per acre would be required to just break even on the operations.