I. Rather than developing an enterprise budget from scratch, it is often easier to begin with one developed by your State Cooperative Extension Service or some other source and modify it to fit your individual situation. Assume you are currently farming and have been given the opportunity to rent an adjoining 300 acres where you would grow only com. You would like to know if it would be profitable to rent this land. To help with your decision, you have acquired the attached enterprise budget for com but feel you must make the following changes for the budget to fit your situation. Use the right-hand column to calculate your modified com enterprise budget. (If no change, use budget value.) 1. Com price is expected to be $4.80 per bu but you expect 150 bu. per acre. (Note yield change affects hauling costs. 2. Seed price is now $2.25 per 1000 seeds. 3. You can now buy fertilizer for $0.60 per pound. Application cost is the same. 4. Herbicide is now $6.75 per pound 5. Tractor & machinery variable costs should be 25% higher than budget values. 6. You would like to make $10.00 per hour for your labor and your big machinery should reduce labor needs to 1.8 hours per acre. 7. Opportunity cost of your capital is 10%. 8. Machinery and tractor fixed costs should be only 85% of budget values. 9. You can rent the land for $125.00 per acre. 10. Custom combine now costs $22.50 per acre. QUESTIONS 1. Would you rent the land for $125.00 per acre? Why? 2. If the price of corn turns out to be $2.00 per bu , what yield would be necessary to just cover all costs including your labor cost. (Ignore the change in hauling cost.) 3. What is the maximum cash rent you could pay for this land (i.e., what cash rent would just make this a breakeven deal, i.e., no profit? 4. If you would be willing to receive only $6.00 per hour for your labor, what is the maximum cash rent you could pay and eam the $6.00 per hour? CORN Price or Cost Per Unit Quantity Value or Cost Your Figures 1. GROSS RECEIPTS CORN $2.25 140 bu $315.00 2. VARIABLE COSTS Preharvest Seed $1.25 30,000 seeds $37.50 0.25 100.0 lbs 25.00 3.00 1.0 acre 3.00 Fertilizer (N) Fertilizer application Herbicide Machinery 6.00 4.0 lbs 24.00 6.00 1.0 acre 6.00 Tractors 10.40 1.0 acre 10.40 Labor 8.00 2.1 hrs. 16.80 Interest on V.C. (for 6 months) Subtotal 12% 122.70 7.36 $130.06 Harvest Costs Custom combine 20.00 1.0 acre 20.00 Custom haul 0.095 140 bu. 13.30 $23.30 Subtotal Total Variable Cost $153.36 3. INCOME ABOVE VARIABLE COST $161.64 4. FIXED COSTS Machinery 8.20 1.0 acre 8.20 Tractors 16.00 1.0 acre 16.00 Land 110.00 1.0 acre 110.00 Total Fixed Costs $134.20 5. TOTAL COSTS $287.56 6. NET RETURNS $27.44