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1. A farmer is considering replacing 5 acres of asparagus with corn for silage. Variable costs for corn production are $530/acre. Fixed costs for corn
1. A farmer is considering replacing 5 acres of asparagus with corn for silage. Variable costs for corn production are $530/acre. Fixed costs for corn production are $760/acre, corn silage yield estimate is 36 tons/acre, silage selling price is $31 .00/ton. Assume the variable cost is $1,450/acre for raising the asparagus and the fixed cost is $800/acre, and the asparagus generates $2,400 in revenue. Conduct a partial budget analysis that shows the net change in profit for the five acres if asparagus is replaced with corn. (5) 2. Would you recommend that the farmer make the change? Explain. (2) 3. Assume that the farmer could reduce his fixed costs to only $240/acre if he grows corn due to differences in equipment and machinery requirements. What would be the net change in profit by growing corn versus asparagus on the entire 5 acres? (4)
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