Haiti Case:

Sameuel Hilaire's contribution margin.

CM/kg = ( Selling price kg ) - (variable

fost/ kg )

CM/kg = ( $0.61/kg ) - ( $0.3233/kg )= $0.29/kg

Breakeven Q = FC / CM/unit

BEQ = $1000 / 0.29/kg

= 3,448 kg of peanuts

Refer to the information above for Samuel. The annual fixed costs are $1,000 a year and variable costs per kilogram of peanuts is $0.3233.

1a)

Assume Samuel can purchase a $2,000 tractor with a ten-year life. If the variable cost per kilogram would decrease by 25 percent, how many kilograms of peanuts would need to be produced to breakeven? Convert kilograms of peanuts to acres to determine how many acres of peanuts Samuel would need to farm to justify the purchase of the tractor? What are the pros and cons of using a tractor?

1b)

Assume Samuel can apply a pesticide to his land at a cost of $250 per acre per year that doubles the yield of peanuts per acre. What is the increase in profits if he applies the pesticide to 2 acres of peanut producing fields?