farm budget for livestock Flashcards
What are farm budgets?
a descriptive tool, which can look at all aspects of a livestock production system
an analysis made at the micro-economic level that is from the point of view of the individual livestock producer
an analysis covering a period of ONE YEAR which can be repeated at yearly intervals
What is a capital budget?
includes investments in durable goods, which in a farm budget are handled by depreciation
often simply covers the investments and ther expenses funded by external donors
What is the recurrent budget?
includes all payments which are made annually, which recur,
in a farm budget these would be divided into variable and fixed costs
What is an annual budget?
a tool for describing and analysing the costs and benefits of a farm on a YEAR by YEAR basis
What is a benefit cost analysis?
considers the costs and benefits of a farm, project over many years
What can we do with farm budgets?
help the farmer to acquire the habit of methodical record keeping,
to monitor progress and assess the farms performance
to enable the farmer easily to compare his results with general standards
to make financial comparison between the performance of the different activities on this farm
can be used on the decision making on the farm
help to appraise possible investments, to decide on animal health care programs, cropping patterns etc
What is an enterprise?
the farms different activities - raising dairy cows, growing tomatoes, are refered as enterprises
What is an enterprise output?
the value of output from each enterprise, which in the case of livestock enterprises is adjusted for purchases of livestock and changes in the value of the herd
What are variable costs?
these costs are the costs which vary directly with volume of output and can be directly attributed to individual enterprises
they vary in the short run and vary directly with the amount of output produced
it can easily be allocated to individual enterprises
for livestock variable costs usually include: veterinary costs, feed, mineral supplements, forage growing costs
What are the forage variable costs?
the variable costs associated with growing forage crops for feeding livestock, it may need special calcuation
they should be divided up according to the number of livestock units represented by each enterprise and allocated accordingly
after the have been calculated, they are often simply included in with other variable costs
Which costs are variable costs for livestock?
Veterinary Costs, Feed, Mineral supplements, Forage Growing costs
What is a gross margin?
this equals output less variable costs
it is usually calculated individually for each farm enterprise and measures the contribution made by each of the farms enterprises towards covering the farms fixed costs
the total farm gross margin is the sum of all the enterprise gross margins
What are the fixed costs?
those costs which remain relatively fixed as the volume of output changes, and often cannot easily be attributed to an individual enterprise are called fixed costs
they vary in the long run and are still incureed even if the output is zero
are usually shared by several enterprises
What do fixed costs usually include?
- regular paid labor or permanent staff
- depreciation on equipment, machinery, vehicles, buildings etc
- maintenance and repairs
- fuel and oil costs where these cannot be assigned to a particular enterprise
- rent
- gas, water, electricity costs whre these can not be assigned to a particular enterprise
What is depreciation?
it is a fixed cost which requires more detailed calculation
it needs to be calculated for alll items which last more then 1 year (these can be called durable, capital, or investment items)
since these items last for several years, only a proportion of their costs needs to be included in a farm budget which covers only one year
