Farmer Ned wants to cash in on the increased demand for ethanol. Accordingly, he purchased a corn farm in Iowa. Ned believes his corn crop can be sold to an ethanol plant for $9.60 per bushel. Variable cost associated with growing and selling a bushel of corn is $7.60. Ned’s annual fixed cost is $686,400.

a. (1) What is the break-even point in sales dollars and bushels of corn?

Break-even point in sales dollars	Answer
Break-even in bushels of corn	Answer	bushels

(2) If Ned’s farm is 3,120 acres, how many bushels must he produce per acre to break even? Answer

Bushels per acre

b. If Ned actually produces 452,400 bushels, what is the margin of safety in bushels, in dollars, and as a percentage?
Note: Round the margin of safety percentage to the nearest whole percentage point.
Margin of safety in bushels Answer

Mark 0.00 out of 1.00

bushels
Margin of safety in dollars $Answer
Margin of safety as a percentage Answer%