Help with question 25

25 Farmer McGregor's proposed purchase of mechanical apple harvester. Farmer McGregor is considering buying a mechanical apple harvester to replace his current method of harvesting apples, which is hand picking by a hired labor crew. Given the following information, would it make sense financially for McGregor to purchase the harvester? Your partial budget analysis should be based on annual costs and income. 1. Estimated crop is 700 bins of apples per year for the entire McGregor farm. 2. Hand picking labor cost is S60 per bin of apples. 3. Machine harvesting will reduce the McGregor farm total labor cost to $6,250 for the 700 bins. 4. Mechanical harvester will cost $50,000 to purchase new. 5. Depreciation: useful life of the harvester is 7 years. Use a simple straight-line depreciation. Straight line means you divide the total new cost by the number years of useful life, and charge that esulting annual depreciation figure each year of the useful life. 6. Annual taxes and insurance on the harvester are $350 per year. 7. Opportunity-cost rate is 5 percent (simple interest) per annum. 8. Fuel, oil, and maintenance on the harvester are $2,500 per year. 9. McGregor estimates he can custom harvest 1,400 bins for other apple growers per year and get $25 as a net fee per bin harvested. 10. If the apples are hand picked McGregor can sort out and sell about $60 net value of apples from each bin. If the bin is machine harvested, this is not possible, so by using the apple harvester McGregor will lose $60 per bin in fresh-market sales. Create a partial budget to answer the question of whether this is a sound financial investment for Farmer McGregor. Print or write out your answer and submit it on Thursday, March 8 at4 p.m. in the classroom