Economics T4 - Analysing farm businesses

Question 1

Which of the following would be a fixed cost and excluded on a typical crop gross margin budget?

land charge

machinery repairs

labour expense

harvesting expense

Answer 1

Land charge

Question 2

It is safe to assume that the input levels shown on published gross margin budgets are the profit-maximizing amounts.

True

False

Answer 2

False

Question 3

In an enterprise budget, Income over Variable Costs is another name for

gross income

gross margin

net income

breakeven selling price

Answer 3

gross margin

Question 4

There is only one possible gross margin budget for each enterprise.

True

False

Answer 4

False

Question 5

Which of the following may be excluded from variable costs when calculating a gross margin?

contract and casual labour X

machinery repairs and maintenance

veterinary and medicines

sprays and fertilisers

Answer 5

.

Question 6

There are no opportunity costs on a gross margin budget.

True

False

Answer 6

False

Question 7

The gross margin system of whole farm analysis:

has been developed for general business management purposes

is similar in structure and presentation to the profit statement normally prepared by farmer s accountants

conforms to the requirements of accounting for profit performance in a business

all of the above

Answer 7

All of the above

Question 8

Interest is included as a variable cost on a gross margin budget

only if money will be borrowed

as an opportunity cost on variable costs regardless whether borrowed or equity capital will be used

because of the investment in machinery

because of the investment in land

Answer 8

as an opportunity cost on variable costs regardless whether borrowed or equity capital will be used

Question 9

Ownership or fixed costs for farm buildings include all of the following except

depreciation X

insurance

utilities

interest on the investment

Answer 9

.

Question 10

Only cash expenses are included on a gross margin budget.

True

False

Answer 10

false

Question 11

A crop gross margin budget containing all economic costs would include an entry for

depreciation

opportunity cost on the capital required

fertilizer and seed

all of the above

Answer 11

all of the above

Question 12

Gross margin statements prepared for management purposes should:

provide fully descriptive titles, including the size of the enterprise

detail both the physical and financial basis of all figures X

include both cash and non-cash items within the time scale of the statement

all of the above

Answer 12

.

Question 13

In a farm enterprise a common unit of production is:

the land area of pasture

the total number of all stock on hand at the beginning of the year.

the number of breeding females X

the total number of stock on hand at the end of the year

Answer 13

.

Question 14

Permanent labour and machinery costs are listed as fixed costs because:

they may be allocated on an arbitrary basis

accurate figures in relation to labour and machinery use require time consuming, detailed records

the allocation of these costs does not significantly aid the analysis of a farm

all of the above X

Answer 14

.

Question 15

The equation for breakeven yield is total cost divided by selling price.

True

False

Answer 15

True

Question 16

On an enterprise budget, fixed costs are often called

direct costs

operating costs

prepaid costs

ownership costs

Answer 16

operating costs

Question 17

The values in a crop gross margin budget are normally for

one unit of output X

one kilogram of output

one tonne of output

one hectare

Answer 17

.

Question 18

Which of the following are or could be totally noncash expenses on an enterprise budget

depreciation

labour expense

management expense

all of the above

Answer 18

all of the above

Question 19

Only cash revenues are included on a gross margin budget.

True

False

Answer 19

false

Question 20

A gross margin budget lists all the returns and expenses associated with producing a unit of a given enterprise.

True

False

Answer 20

true

Question 21

Some enterprises may have more than one source of revenue.

True

False

Answer 21

true

Question 22

If fixed costs on an enterprise budget were to increase, the market price needed to break even would increase.

True

False

Answer 22

true

Question 23

On a breeding livestock gross margin budget, if replacement females are assumed to be raised on the farm or ranch,

an expense item for their depreciation should be shown X

the number of young females sold should be reduced

the cost of buying replacements should also be included

income from the sale of cull breeding animals can be ignored

Answer 23

.

Question 24

Cost of production will be the same value as

average total cost

total cost

average variable cost

marginal cost X

Answer 24

.

Question 25

A measure of whole farm profit is obtained by:

subtracting the total fixed costs from the total farm gross margin

adding the net margins of each separate farm enterprise

subtracting fixed and variable costs from the total farm gross margin X

adding crop and livestock profits

Answer 25

.

Question 26

If the cost of production is greater than the selling price, the revenue from the enterprise will be less than the total economic costs.

True

False

Answer 26

true

Question 27

If output increases with no change in total cost, breakeven price will

increase

decrease

remain constant

initially decrease and then begin to increase

Answer 27

decrease

Question 28

Fixed costs are:

common to all enterprises on the farm X

do not change appreciably with small changes in the enterprise structure of the farm

cannot be allocated accurately to the various farm enterprises

all of the above

Answer 28

.

Question 29

The cost of production is the same as average total cost.

True

False

Answer 29

true

Question 30

For a given total cost, the higher the yield, the lower the breakeven price.

True

False

Answer 30

true

Question 31

Contract and casual labour which can be directly attributed to an enterprise are:

listed as fixed costs

treated in the same way as permanent labour and machinery costs

listed as variable costs

best unlisted because of the time and detail required for record maintenance

Answer 31

listed as fixed costs

Question 32

Gross margin budgets are useful when selecting enterprises to include in a whole farm plan.

True

False

Answer 32

true

Question 33

Which of the following terms, if used on a gross margin budget, would be considered the same as variable cost?

ownership cost

operating cost

overhead cost

indirect cost

Answer 33

operating cost