1)Calculate the annual total fixed costs for a combine that has an initial price

Question

1)Calculate the annual total fixed costs for a combine that has an initial price of $300,000, a useful life of 7 years, a salvage value of $50,000, and was financed at an interest rate of 5%?

2) Consider a farm with 1500 acres total where 1000 acres are in wheat and 500 are in soybeans. Wheat yield is 90 bushels/acre, wheat price is $3/bushel, and total operating expenses per acre are $100. Soybean yields are 35 bushels/acre, soybean price is $7/bushel, and total operating expenses per acre are $100. Construct a partial budget table (10 points) and determine whether it makes sense to increase wheat 1200 acres and reduce soybeans to 300 acres?

Explanation / Answer

1) annual total fixed costs =depreciation expense +interest expense

depreciation expense = (300,000-50000)/7 =$35714.29

Interest expense = 5%*300000 =$15000

annual total fixed costs = 35714.29+15000 =$50714.29

2)

The profit with 1000 acres in wheat and 500 in soybeans = $242500

The profit with 1200 acres in wheat and 300 in soybeans = $247500

Difference in profit = $5000

Yes, makes sense to increase wheat 1200 acres and reduce soybeans to 300 acres since profit has increased by $5000

Old Budget New Budget Wheat Soyabeans Wheat Soyabeans Number of acres 1000 500 1200 300 Revenue 270000 122500 324000 73500 Operating Cost 100000 50000 120000 30000 Profit 170000 72500 204000 43500 Total Profit 242500 247500

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.