March 18, 2010
Name:
____________
Participant # _______
ARE 495U Assignment
2- 10 points
Create 5 or more
marketing plan questions
that need to be answered
related to FF.
2010
North Carolina FFA
Farm Business Management
JUNIOR Career Development Event
Section II: Problem Solving (200 points)
Read each problem carefully. The main concept of each problem is stated at the start of each problem. Read the entire
problem before beginning work on that problem.
Section II contains four (4) problems. Check to see that you have 13 pages including the cover page. Some pages may
contain more than one problem. The point value for each of your answers is stated in parenthesis to the right of each
blank. You have 100 minutes to complete this section of the Career Development Event.
prepared by
Dr. Phil Hamilton,
Professor and Director
The Lois G. Britt Agribusiness Center
Mount Olive College
634 Henderson St., Mount Olive, North Carolina 28365
919.658.2502
in cooperation with
Department of Agricultural and Extension Education
College of Agriculture and Life Sciences
North Carolina State University
sponsored by
Southern States Cooperative, Inc.
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
page 1 of 11
Problem 1 – Enterprise Budgets (50 points)
Use the enterprise budget found on page 2 to answer questions found on page 3.
Catfish Enterprise Budget for 4 - 8-Acre Ponds
Fingerlings/Acre
Lbs. feed /lb. Weight gain
Final weight lb.
% Mortality/unharv. fish
Total Acreage
Labor Hours/Day
Aerator HP
5,000
1.95
2
10
32
2.5
10
Interest Rate
Lbs./1000 begin. weight
Day growing season
Growing cycles/year
% Death Loss
Hourly Rate
Hrs. Aerators in Use/Day
Days Aerators in Use
9
91
240
1
1
7.00
10.00
180.00
1. Gross Receipts
Total
Value
205,714
Per Acre
6,429
Unit Cost
0.10
250.00
70.00
4.50
3,480.00
0.08
7.00
0.06
Total Cost
16,000
67,761
2,240
1,215
3,480
9,180
10,500
6,656
117,031
Per Acre
500.00
2,117.52
70.00
37.97
108.75
286.88
328.13
207.99
3,657.22
0.03
0.08
8,340
22,239
30,579
260.62
694.98
955.60
147610
4612.82
7,971
5,818
13,788
249.08
181.80
430.89
161,399
5,043.71
Breakeven Cost Variable Expenses -- $/lb.
Breakeven Cost All Expenses -$/lb.
Net Income Above Variable Expenses
Net Income Above all Specified Costs
0.53
0.58
58,104
44,315
1,815.74
1,384.85
Net Returns at high, average and low prices last 3 years
Lowest price = $0.59
Avg. Price last 3 years = $0.74
Highest price = $0.79
2,617
44,315
58,215
82
1,385
1,819
Item
Catfish
2. Variable Cost
Item
Fingerlings
Feed (32%)
Chemicals
Tractor (Fuel &Oil)
Machinery(R&M)
Utilities
Labor
Interest on Operate Cap.
Total Operating Cost
Each
Unit
lb.
Quantity
277,992
Unit Price
0.74
Each
Unit
Acre
Ton
Acre
Hour
cycles/yr
kwh
Hour
cycle
Quantity
5,000
271.0
32
270
1
122,400
600
110,376
lb.
lb.
277,992
277,992
Harvest Expenses
Harvest
Hauling
Total Harvest Cost
Total Variable Cost
Fixed Cost
Tractor + Machinery*
Building & Equipment*
Total Fixed Cost
1
1
1
1
Total All Expenses
7,971
5,818
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
page 2 of 11
Review the catfish enterprise budget on page 2. Answer the following questions related to the
Mr. Davis’ catfish farm business projections. (5 points each)
1. What is the hired labor rate per hour?
$
per hour
2. What is the expected yield per acre?
______ pounds
3. What is the interest rate for annual operating capital?
%
4. What is the total fixed cost per acre?
$
_______ per acre
5. If the yield of production remains at 6,429 pounds per acre and all costs remain unchanged,
what is the break-even price per pound to cover total operating costs?
$
________
per pound
6. What is the total labor cost per acre?
$____________ per acre
7. What are the anticipated returns above all specified costs per acre?
$
_______ per acre
8. What is the total harvest cost for the four 8-acre ponds?
$
________
9. What is the total harvest cost per acre for the four 8-acre ponds?
$____________ per acre
10. How many hours of hired labor will be required per acre?
_____________ per acre
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
page 3 of 11
Problem 2 – Projected Cash Flow (50 points)
The Davis farm business consulted their farm business advisor in preparing a projected cash flow for
2010.
A. The following list of 10 items is related to the Davis farm business. They are not sure if they should
be included in the projected cash flow. Indicate with a (+) for those items that should be included in
the projected cash flow and a (0) for those items that should not be listed on their projected cash
flow. (2.5 points each)
1. Value of the exchange of fuel for labor
2. Equity in 2009 grain listed on ending inventory
3. Life Insurance
4. Feed purchased for next year
5. Cost of internet site development for value-added farm sales
6. Payment of real estate tax on home
7. Cost of livestock purchased for resale
8. Paid family labor
9. End of the year accrued interest due on a machinery loan
10. Interest paid on machinery loan
______
______
______
______
______
______
______
______
______
______
B. In constructing the projected cash flow, identify where selected items should be found. Select the
best answer from cash flow categories A thru O and write that letter in the correct blank beside the
items listed 1 thru 10 below. Categories may be used more than once. (1 point each)
______
______
______
______
______
______
______
______
______
______
1. Sales from peach orchard products
2. Tax preparation for farm business
3. Principal payment on operating loan
4. Difference between cash outflows and inflows
5. Tuition paid for artificial insemination training
6. Interest paid on personal automobile loan
7. Payment of real estate tax on farmland
8. Depreciation of machine storage building
9. Cash received from a loan from neighbor
10. Spouse’s salary from supermarket
Cash Flow Categories
A. Operating Receipts
B. Capital Sale
C. Operating Expenses
D. Overhead Expenses
E. Non-farm Income
F. Family Living
G. Cash Position
H. Cash Difference
I. Accrued Interest
J. Interest Payments
K. Total Cash Outflow
L. Sources of Cash
M. Net Cash Flow
N. Principal Payments
O. Not on a Projected Cash Flow
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
page 4 of 11
Problem 3 - Cash Costs and Economic Costs (50 points)
Tar Heel Farm Business has purchased a 2010 Ford F250 Diesel Crew Cab pick-up truck for $35,000
cash. The managers are using the following information to determine the cost of owning and operating
the pick-up truck. They have been encouraged to consider opportunity costs and depreciation in
determining their projected costs per mile to own and operate the truck.
2010 Ford F250 Diesel Crew Cab pick-up truck
Table A: 30,000
Purchase price
Useful life (UL) in years
Salvage Value (SV) at the end of useful life
Estimated mileage to be driven each year
Annual repairs at 4% of purchase price (repairs coefficient)
Insurance cost per year
Opportunity cost of money (interest)
Property tax per year
Fuel Economy: miles per gallon
Fuel Cost per gallon
Shed/ Garage/ Shelter for the pick-up truck per year
$
Table B: 25,000
35,000.00
$
35,000.00
7
$
10,000.00
7
$
10,000.00
30,000
25,000
4%
$
1,050.00
4%
$
1,050.00
5%
$
400.00
5%
$
400.00
15
15
$
3.00
$
3.00
$
250.00
$
250.00
SOME USEFUL INFORMATION in completing table B on the next page
Cash Costs are those costs that are paid with cash, check or other liquid forms of currency.
Economic Costs are cash costs as well as those that are not cash, such as, depreciation, opportunity
interest. Economic costs are all costs relative to a production asset or activity that a manager should
consider when planning and control business activities.
Table A: 30,000 miles driven per year
Fixed Costs per Year
Depreciation = (Purchase Price - Salvage value) divided by Useful Life
(Interest = ((Purchase Price + Salvage Value) / 2) X Interest)
Tax =
Insurance =
Shelter for Pickup =
Total Fixed Costs
Variable Costs / year (30,000 miles driven/year)
Fuel = Miles / MPG X Cost of Gasoline
Repair = Purchase Price X Repair Coefficient
Opportunity Cost of Interest = Annual Variable Cost X Interest
Total Variable Cost
Total Cost per year
Total Cost per mile @ 30,000 miles driven
Cash Costs
Economic Costs
$
-
$
3,571.43
$
-
$
1,125.00
$
400.00
$
400.00
$
1,050.00
$
1,050.00
$
250.00
$
250.00
$
1,700.00
$
6,396.43
$
6,000.00
$
6,000.00
$
1,400.00
$
1,400.00
$
370.00
$
$
$
7,770.00
14,166.43
0.4722
$
$
$
$
7,400.00
9,100.00
0.3033
Complete Table B calculating the correct value for each blank space (2.5 points each)
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
page 5 of 11
Table B: 25,000 miles driven per year
Cash Costs
Fixed Costs per Year
Depreciation = (Purchase Price - Salvage value) divided by Useful Life $
(Interest = ((Purchase Price + Salvage Value) / 2) X Interest)
$
Tax =
Insurance =
Shelter for Pickup =
Total Fixed Costs
Variable Costs / year (25,000 miles driven/year)
Fuel = Miles / MPG X Cost of Gasoline
Repair = Purchase Price X Repair Coefficient
Opportunity Cost of Interest = Annual Variable Cost X Interest
Total Variable Cost
Total Cost per year
Total Cost per mile
Economic Costs
-
$
3,571.43
-
$
1,125.00
Note: Write “none” or “zero” in any category with no entry.
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
page 6 of 11
Problem 4 - The Balance Sheet & Income Statement & Analysis (50 points)
SOME USEFUL INFORMATION for answering the question below.
Current assets are those that will either be used up or sold in the next year as a normal part of the
farm business activities, and their sale will not disrupt future production activities.
Non-Current assets are less liquid. They have a useful life greater than one year. Their sale
affects the future income potential of the business.
Current liabilities are those financial obligations which will become due and payable within one
year from the date of the balance sheet.
Non-CurrentSHEETS
liabilities represent loans where repayment is extended over a period greater than
BALANCE
one year. Many times these are loans for the
purchase of12/31/2008
real estate, land,
machinery, 12/31/2006
or buildings.
12/31/2009
12/31/2007
ASSETS
Current Farm Assets
Cash
Accounts Receivable
Crop Inventory
Market Livestock
Prepaid Expenses
Total Current Assets
1,500
13,555
141,228
108,725
2,283
267,291
1,500
14,553
106,063
105,336
1,319
228,771
1,500
15,340
113,739
101,915
2,300
234,794
1,500
5,993
25,500
88,800
121,793
Non-Current Farm Assets
Machinery & Equipment
Farm Vehicles
Raised Breeding Livestock
Coop Stock
Total Non-Current Assets
Total Farm Assets
243,390
34,840
42,400
148,500
469,130
736,421
192,384
41,000
30,950
148,500
412,834
641,605
151,084
48,000
38,650
196,000
433,734
668,528
43,100
46,000
35,550
56,000
180,650
302,443
Current Farm Liabilities
Accounts Payable
Operating Loan
CCC Loans
Current Portion Term Debt
Accrued Interest
Total Current Farm Liabilities
23,667
144,271
40,297
5,242
213,477
5,865
60,043
43,382
36,692
6,558
152,540
7,788
220,075
31,661
47,941
7,260
314,725
58,674
16,122
2,595
77,391
Non-Current Farm Liabilities
Machinery & Equipment Notes
Total Non-Current Farm Liabilities
Total Farm Liabilities
143,945
143,945
357,422
129,518
129,518
282,058
114,310
114,310
429,035
42,993
42,993
120,384
Farm Net Worth (Equity)
378,999
359,547
239,493
182,059
LIABIITIES
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
page 7 of 11
INCOME STATEMENTS
2009
INCOME
Cash Income
Crop Sales
Non-breeding raised livestock
Lvst. Purch. For Resale - Beef
Lvst. Purch. For Resale - Dairy Beef
Ag Program Payments
Crop Insurance Proceeds
Custom Hire
Other
Total Cash Income
Adjustments
Inventory Change - Crops
Inventory Change - Livestock
Change in Accounts Receivable
Total Adjustments
Total Income
EXPENSES
Livestock Purchased for Resale
Operating Expenses
Seeds & Plants
Fertilizers & Lime
Chemicals
Feed Supplement
Feed Grain & Roughage
Veterinary / Breeding / Medicine
Custom Hire
Labor Hired
Car & Truck
Gasoline / Fuel / Oil
Repairs & Maintenance
Rent and Leases
Insurance - Farm and Crop
Supplies
Utilities
Miscellaneous
Total Operating Expenses
Operating Interest
Term Interest
Total Interest Expense
Total Cash Expenses
Adjustments
Change - Accounts Payable
Change - Prepaid Expenses
Change - Interest Payable
Depreciation
Total Adjustments
Total Expenses
Net Cash Income
Net Farm Income from Operations
2008
2007
$ 520,444
$
51,484
$ 238,163
$ 241,191
$
17,368
$
$
18,000
$
1,698
$ 1,088,348
$
$
$
$
$
$
$
$
$
210,173
84,132
150,338
155,612
12,022
27,420
699
640,396
$
38,165
$
4,389
$
(1,023)
$
41,531
$ 1,129,879
$ (10,676)
$
3,421
$
(807)
$
(8,062)
$ 632,334
$ 88,239
$ 43,115
$
5,993
$ 137,347
$ 486,424
$
157,600
$ 110,500
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
39,712
96,317
21,663
14,238
33,561
4,532
6,800
4,300
7,932
44,112
34,986
146,465
20,616
6,549
2,543
1,856
486,182
34,854
25,149
60,003
703,785
$ 19,962
$ 45,013
$ 11,997
$ 13,697
$ 32,666
$
4,132
$
4,500
$
1,600
$
6,123
$ 18,288
$ 22,194
$ 65,528
$ 10,200
$
4,369
$
2,167
$
1,033
$ 263,469
$
3,338
$ 19,671
$ 23,009
$ 396,978
$ 25,154
$ 36,249
$ 11,273
$ 10,738
$ 22,059
$
3,050
$
$
864
$
5,947
$ 13,479
$ 21,524
$ 72,417
$
7,487
$
5,061
$
982
$
1,027
$ 237,311
$
4,455
$ 11,455
$ 15,910
$ 310,625
$
$
$
$
$
$
17,802
(944)
(1,316)
55,646
71,188
774,973
$
(1,923)
$
(981)
$
(702)
$ 46,677
$ 43,071
$ 440,049
$
7,788
$
2,300
$
4,665
$ 39,417
$ 54,170
$ 364,795
$
$
384,563
354,906
$ 243,418
$ 192,285
$ 38,452
$ 121,629
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
$ 141,191
$ 53,314
$ 63,431
$ 18,852
$ 12,088
$ 46,631
$
1,570
$ 12,000
$ 349,077
57,404
page 8 of 11
You are a loan officer for a Farm Credit System bank and Bill Bauman, the owner and operator of
Sampson Farms requests a loan based in the balance sheet show above. Calculate the ratios and
information requested below and give your reasons for granting or denying a loan for Sampson Farms.
1. Calculate the Current Ratio.
Current Ratio = ______________ : 1
(12 points)
2. Calculate the Debt/Asset Ratio.
Debt/Asset Ratio = _______________: 1
(12 points)
3. Calculate the amount of Working Capital.
Working Capital = $ __________________ (12 points)
4. Check one. (14 points) Based solely on the information in this balance sheet, as a loan officer
deciding whether to deny or grant a loan for Sampson Farms, I
_______ would grant a loan
_______ deny a loan
_______ cannot make the loan decision. Before I could make a decision, I need, at least, the
following additional information:
Helpful Hint
The current ratio is a measure of liquidity. It determines the ability of the farm business to meet
short-term debt and other obligations from available cash. It’s the ratio of current assets to current
liabilities.
The debt/asset ratio compares total dollars of debt to total dollars of assets. The ratio measures the
amount of risk in regard to debt against the farm business. A high ratio indicates greater risk and
lower borrowing a capacity.
End of Problem Solving Section of 2010 JUNIOR FBM CDE
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
page 9 of 11
Name: ____________________________ Participant # _______
2010 STATE FFA JUNIOR FBM PROBLEM SOLVING SCORE SHEET
Possible Score Contestant's Score
Problem 1
Enterprise Budget - Catfish
50
Problem 2
Projected Cash Flow
50
Problem 3
Cash Costs and Economic Costs
50
Problem 4
The Balance Sheet & Income Statement & Analysis
50
200
North Carolina FFA Farm Business Management CDE – 2010 JUNIOR
page 10 of 11