Assignment 18 Fall 2019 AGEC 325 Name A ranch purchases feeder cattle and finishes them out each year. Some years the ranch makes money, other years they lose money. Budgeting before they buy the cattle helps them determine which result is more likely. Based on budget projections they buy either 550-pound steer calves or 750-pound yearling steers. PURCHASE AND SELLING PRICE 550 lb. 750 lb. Calves Yearlings per head per head Purchase Price per cwt. $134.70 $124.75 Selling Price per cwt. $108.57 $113.85 Note: prices are quoted in $ per cwt. (100 pounds), convert the cottle weights in the budget to cwt. FEED RATIONS SSO Ib. Calves per head 750 lb. Yearlings per head ton 2.45 Corn Silage Supplement Expected Days on Feed Selling Weight 1.50 120 191 230 1,150 160 lbs. 1,250 VARIABLE COSTS 550 lb. 750 lb. Calves Yearlings per head per head Corn $4.12 $4 12 Silage ton $33.00 $33.00 Supplement lbs. $0.10 $0.10 Veterinary and health head $10.00 $8.00 Machinery and equipment operating head $11.00 $7.00 Marketing and miscellaneous head $14.00 $14.00 Labor cost per hour $15.00 hour Interest rate for variable costs Note on interest rate for variable costs: The lender will finance only 50% of the feed and variable costs Interest on feed and other variable costs = feed and other variable costs X 50% X (number of days funds are borrowed + 365) X interest rate for variable costs Interest on the cost of the animal cost of the animal X (number of days owned + 365) X interest rate for variable costs OWNERSHIP COSTS of facilities and equipment: $10,000 per year spread over 500 head per year AGEC 325 Assignment 18 Fall 2019 1. Using the information on page 1, develop an enterprise budget for 550 lb. yearling steers. (7 points) Name of enterprise: sso ib. Calves Quantity Price Total Gross Revenue Sales income less 1% for death loss Gross Revenue Variable costs Purchase of feeder animal Interest on cost of feeder animal Feed Corn Corn Silage Supplement Other variable costs Veterinary and health Machinery and equipment operating costs Marketing and miscellaneous Labor Interest on feed, other variable costs Total variable costs Ownership costs for facilities, equipment Total of all costs Gross margin Profit and return to management Breakeven selling price needed to pay variable costs (reduce selling wt. 1% for death loss) 2. Given the selling prices and other budgeted costs, what is the highest purchase price that can be payed and just cover all your variable costs? Subtract all other variable costs from expected gross revenue and divide by the purchase weight. Don't worry about changing the interest cost. (6 points) Assignment 18 Fall 2019 AGEC 325 Name A ranch purchases feeder cattle and finishes them out each year. Some years the ranch makes money, other years they lose money. Budgeting before they buy the cattle helps them determine which result is more likely. Based on budget projections they buy either 550-pound steer calves or 750-pound yearling steers. PURCHASE AND SELLING PRICE 550 lb. 750 lb. Calves Yearlings per head per head Purchase Price per cwt. $134.70 $124.75 Selling Price per cwt. $108.57 $113.85 Note: prices are quoted in $ per cwt. (100 pounds), convert the cottle weights in the budget to cwt. FEED RATIONS SSO Ib. Calves per head 750 lb. Yearlings per head ton 2.45 Corn Silage Supplement Expected Days on Feed Selling Weight 1.50 120 191 230 1,150 160 lbs. 1,250 VARIABLE COSTS 550 lb. 750 lb. Calves Yearlings per head per head Corn $4.12 $4 12 Silage ton $33.00 $33.00 Supplement lbs. $0.10 $0.10 Veterinary and health head $10.00 $8.00 Machinery and equipment operating head $11.00 $7.00 Marketing and miscellaneous head $14.00 $14.00 Labor cost per hour $15.00 hour Interest rate for variable costs Note on interest rate for variable costs: The lender will finance only 50% of the feed and variable costs Interest on feed and other variable costs = feed and other variable costs X 50% X (number of days funds are borrowed + 365) X interest rate for variable costs Interest on the cost of the animal cost of the animal X (number of days owned + 365) X interest rate for variable costs OWNERSHIP COSTS of facilities and equipment: $10,000 per year spread over 500 head per year AGEC 325 Assignment 18 Fall 2019 1. Using the information on page 1, develop an enterprise budget for 550 lb. yearling steers. (7 points) Name of enterprise: sso ib. Calves Quantity Price Total Gross Revenue Sales income less 1% for death loss Gross Revenue Variable costs Purchase of feeder animal Interest on cost of feeder animal Feed Corn Corn Silage Supplement Other variable costs Veterinary and health Machinery and equipment operating costs Marketing and miscellaneous Labor Interest on feed, other variable costs Total variable costs Ownership costs for facilities, equipment Total of all costs Gross margin Profit and return to management Breakeven selling price needed to pay variable costs (reduce selling wt. 1% for death loss) 2. Given the selling prices and other budgeted costs, what is the highest purchase price that can be payed and just cover all your variable costs? Subtract all other variable costs from expected gross revenue and divide by the purchase weight. Don't worry about changing the interest cost. (6 points)
