MissouriAgBusProblemTest2013.docx · Web view38. If ethanol is worth $2.50 per gallon, DDGS is...

2014 FLANDREAU FFA FARM MANAGEMENT CONTEST

Problems Section

Choose the best answer and mark the corresponding numbered space on the answer sheet. Each question is worth four (4) points. There is only one correct answer for each question. Answers have been rounded.

PROBLEM I - Balance Sheet

Using the information below, complete the net worth statement for January 1, 2013:

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $750,000 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,500 Machinery and equipment . . . . . . . . . . . . . . . . . . . . . 310,000 Cows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,000 Calves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,600 Sows and boars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 Market hogs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140,000 Checking and savings . . . . . . . . . . . . . . . . . . . . . . . . . 17,800 Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,400 Hog buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,000 Feed and hay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..12,500 Accrued interest owed . . . . . . . . . . . . . . . . . . . . . . . . 29,660 Accrued taxes owed . . . . . . . . . . . . . . . . . . . . . . . . . . .23,750 30-year land loan balance is $320,000. $16,000 plus interest is due February 1 of each year. 7-year hog building loan balance is $44,000. $11,000 plus interest is due August 31 of each year. 5-year equipment loan balance is $78,016. $19,504 plus interest is due each February 1.

Current Assets: Current Liabilities: __________________________________ _________________________________ __________________________________ _________________________________ __________________________________ _________________________________ __________________________________ _________________________________ __________________________________ _________________________________ __________________________________ _________________________________ __________________________________ _________________________________ __________________________________ _________________________________

Total _________________ Total __________________

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Questions 1 through 7 refer to PROBLEM I

1. The total value of current assets on January 1, 2013, was:

A. $68,700B. $208,700C. $227,300D. $346,300E. None of the above

2. The total value of non-current assets was:

A. $750,000B. $1,134,000C. $1,185,000D. $1,230,000E. None of the above

3. The total value of current liabilities was:


4. The total value of non-current liabilities was:


5. The net worth was:

A. $511,926B. $834,483C. $945,374D. $1,457,300E. None of the above

6. The debt-to-equity ratio was:

A. 0.351B. 0.542C. 1.953D. 2.847E. None of the above

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7. The working capital was:


PROBLEM II -- Enterprise BudgetUse the following corn budget to answer Questions 8 through 16.

CORN FOR GRAIN, circular sprinkler system, custom harvest (combine & hauling), shallow electric 50' well.______________________________________________________________________Operating Inputs Units Price Qty. Value Your ValueCorn seed Lbs. 3.80 28.80 $109.44 __________Nitrogen (N) Lbs. 0.58 180.00 104.40 __________Phosphate (P2O5) Lbs. 0.48 60.00 28.80 __________Potash (K20) Lbs. 0.50 50.00 25.00 __________Custom harvest Acre 30.00 1.00 30.00 __________Custom hauling Bu. 0.11 180.00 19.80 __________Rent fert. spreader/ac. Acre 2.44 3.00 7.32 __________Insecticide Acre 22.80 1.00 22.80 __________Herbicide Acre 25.12 1.00 25.12 __________Annual operating capital Dol. 0.08 70.00 5.60 __________Machinery labor Hour 12.00 1.96 23.52 __________Irrigation labor Hour 12.00 0.95 11.40 __________Mach. fuel, lube, repair Dol. 24.39 __________Irrig. fuel, lube, repair Dol. 51.10 __________Total operating costs $488.69 __________

Fixed costsMachinery: Amount ValueInterest at 8.0% 245.00 19.60 __________Depr., taxes, insurance 26.89 __________Irrigation:Interest at 8.0% 314.20 25.14 __________Depr., taxes, insurance 36.00 __________Total fixed costs $107.63 __________

Production Units Price Quantity ValueCorn Bu. 5.50 180.00 990.00 __________Total receipts 990.00

Returns above total operating costs 501.31 __________Returns above all specified costs 393.68 _________________________________________________________________________________8. The return above total operating cost per acre is:

A. $107.63B. $124.00C. $231.63D. $501.31E. None of the above

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9. How many hours of labor are budgeted per acre?A. 1.96B. 2.91C. 12.00D. 34.92E. None of the above

10. What is the total budgeted interest cost per acre?A. $19.60B. $44.74C. $50.34D. $107.63E. None of the above

11. What price per bushel is paid for seed corn?A. $3.40B. $21.30C. $72.42D. $212.80E. None of the above

12. What is the total specified fertilization cost per acre? (ignore cost of labor and operating capital)


13. How many bushels of corn are required to cover the specified irrigation costs per acre?A. 22.48B. 32.07C. 35.33D. 48.61E. None of the above

14. What yield will cause returns above all specified costs to equal zero?A. 108.4 bu.B. 144.6 bu.C. 148.8 bu.D. 180.0 bu.E. None of the above

15. What will be the per acre returns above all specified costs if one-third of the crop must be given to the landlord for rent of the land?

A. -$86.00B. $4.57C. $71.14D. $63.68E. None of the above

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16. If one-third of the crop is given as rent, what price received for corn will make the per acre receipts above all specified costs equal zero?


PROBLEM III -- Income Tax ManagementUse the tables at the end of this exam to calculate depreciation on the following item. On August 5, 2012, Sam traded tractors. The old tractor had a remaining undepreciated value of $5,709. Sam paid $50,000 "boot" in the trade for the new tractor. He elects to roll the basis of the used tractor into the new one.

17. The tractor is:A. 3-year propertyB. 5-year propertyC. 7-year propertyD. 10-year propertyE. None of the above

18. If Sam does not expense any of the cost of the tractor, then 2012 depreciation will be (use MACRS and mid-quarter convention):

A. $3,397.30B. $4,476.78C. $4,756.35D. $5,945.44E. None of the above

19. If Sam expenses the maximum on the tractor trade, and uses the mid-year convention and MACRS, then 2012 depreciation will be:


20. If Sam does not expense any of the cost and uses the mid-year convention and straight line depreciation over the alternate MACRS life, his 2012 depreciation will be:

A. $2,089.09B. $2,785.45C. $3,170.90D. $4,529.86E. None of the above

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21. If Sam uses MACRS, then the first year the tractor will appear on Sam's January balance sheet with a zero book value will be in

A. 2018.B. 2019.C. 2020.D. 2021.E. None of the above

22. Under MACRS, a computer is classified asA. 3-year propertyB. 5-year propertyC. 7-year propertyD. 10-year propertyE. None of the above

PROBLEM IV – Supply and Demand

The above graph represents the supply of foreign pork available for import into the U.S. (SF), the supply of pork produced in the U.S. (SUS), the total supply of pork in the U.S. (ST), the foreign demand for U.S. pork (DF), the domestic demand for pork (DUS), and the total demand for pork (DT).

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23. What is the market equilibrium price of pork in the U.S.?A. P1

B. P2

C. P3

D. P4

E. None of the above24. At the market equilibrium price, how much pork will be imported into the U.S.?

A. Q1

B. Q2

C. Q3

D. Q4

E. Q5

25. At the market equilibrium price, how much pork will be exported?A. Q1

B. Q2

C. Q3

D. Q4

E. Q5

26. Without foreign trade, the equilibrium price of pork would beA. P1

B. P2

C. P3

D. P4

E. None of the above27. P3 times Q2 equals

A. the total value of pork imports.B. the total value of pork exports.C. value of imports minus exports.D. value of exports minus imports.E. None of the above

28. What is the value of pork consumed in the U.S.?A. P1 times Q1

B. P2 times Q2

C. P3 times Q3

D. P3 times Q5

E. None of the above

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PROBLEM V - MarketingOn December 1, a farmer has 4,000 bushels of corn in his bin. He sells it on February 15. Ignore commissions, storage cost, and interest.December 1 quotes: February 15 quotes:

March futures price = $6.20 March futures price = $6.15Expected basis = $0.10 under the board Basis = $0.15 under the board

Strike ---- Premiums ---- ---- Premiums ----price Call Put Call Put$5.80 $0.42 $0.01 $0.38 $0.01$5.90 $0.32 $0.01 $0.28 $0.01$6.00 $0.23 $0.01 $0.18 $0.01$6.10 $0.15 $0.02 $0.09 $0.02$6.20 $0.09 $0.08 $0.02 $0.05$6.30 $0.04 $0.16 $0.01 $0.13

29. What is the local cash price of corn on February 15?A. $6.00B. $6.10C. $6.15D. $6.30E. None of the above

30. If the farmer sold a futures contract on December 1 and bought back the contract on February 15, what would be the realized price per bushel (cash + net on futures) for the corn?


31. If the farmer bought a $6.20 Put on December 1 and sold the Put on February 15, what would be the realized price per bushel (cash + net on options) for his corn?


32. If the farmer bought a $6.20 Put and sold a $6.20 Call on December 1, and sold the Put and bought back the Call on February 15, what would be the realized price per bushel (cash + net on options) for his corn?


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33. Given all the information above, which of the following actions taken on December 1 turned out to be the most profitable?

A. Selling a futures contract.B. Buying a $6.20 Put option.C. Buying a $6.20 Put and selling a $6.20 Call.D. Taking no market action.

34. Which of the following statements is true?A. The cost of a futures contract usually declines as it nears expiration.B. The cost of a futures contract usually rises as it nears expiration.C. The cost of a Call usually declines as it nears expiration.D. The cost of a Call usually rises as it nears expiration.E. None of the above

PROBLEM VI - BiofuelsEthanol plants usually use corn to produce ethanol, dried distillers grain with solubles (DDGS), and carbon dioxide. A typical ethanol plant will produce 2.75 gallons of ethanol, 17 pounds of DDGS, and 17 pounds of carbon dioxide per bushel of corn.

35. How many tons of DDGS would a 45 million gallon ethanol plant produce per year operating at capacity?

A. 16,360 tonsB. 78,105 tonsC. 139,091 tonsD. 278,182 tonsE. None of the above

36. If, in addition to the cost of the corn, it costs 4.5 cents per pound of corn to process corn through an ethanol plant, what is the annual non-corn operating cost for a 45 million gallon plant?

A. $0.7 millionB. $7 millionC. $37 millionD. $41 millionE. None of the above

37. If ethanol is worth $2.40 per gallon, DDGS is worth $250 per ton, and carbon dioxide is worth 0.5 cents per pound, what is the value of the products from a bushel of corn processed in a typical ethanol plant?


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38. If ethanol is worth $2.50 per gallon, DDGS is worth 90% of the price of a ton of corn, carbon dioxide is worth 0.5 cents per pound, and operating costs are 4.5 cents per pound of corn, what is the breakeven price a typical ethanol plant can pay for a bushel of corn?


PROBLEM VII. - Cost AnalysisA local business can produce up to 7 widgets per hour. The partially completed table below shows some of their cost data. Complete the cost table then answer questions 45-50. Round all numbers to the nearest tenth.

39. What is the value of A?A. 50B. 60C. 80D. 100E. None of the above

40. What is the value of B?A. 124B. 134C. 140D. 144E. None of the above

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41. What is the value of C?A. 32B. 36C. 40D. 44E. None of the above

42. What is the value of D?A. 10.0B. 13.4C. 20.0D. 33.4E. None of the above

43. What is the value of E?A. 8B. 10C. 12D. 16E. None of the above

44. What is the value of F?A. 12B. 16C. 20D. 24E. None of the above

PROBLEM VIII - Soil Fertility

45. Assume that a farmer has land that needs 120 lbs. N, 100 lbs. P205, and 90 lbs. K2O. If he can purchase commercial fertilizer at $0.40/lb. of N, $0.60/lb. of P205, and $0.50/lb. of K2O, what will it cost him to fertilize one acre of land?


46. Swine pit manure has a concentration of 50 lbs. N, 40 lbs. P205, and 30 lbs. K2O per 1,000 gallons. Only 60% of the N is available to crops. Assuming that N is worth $.40/lb., K2O is worth $.50/lb., and P205 is worth $.60/lb., what is the maximum fertilizer value of the manure in 1,000 gallons of effluent?


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47. Assume that this manure is applied at a rate of 1,300 gal./ac., what is the per-acre fertilizer value of this manure?


48. Assuming that this manure is applied to soybeans (which need no N fertilizer), what would the fertilizer value of 1,000 gallons of manure be?


49. Assume that a farmer applies 4,000 gallons of manure to his land. If the available nutrients in the manure were valued comparable to commercial fertilizer, what would the fertilizer value of the manure be?


50. Assume that a farmer applies 4,000 gallons of manure to his land. If only the needed nutrients in the manure were valued (120 lbs. of N, 100 lbs. of P205, and 90 lbs. of K2O), what would the fertilizer value of the manure be?


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Flandreau CDE 2014 Ag Business Management Problems - KEY

1. C2. D3. B4. E5. C6. B7. B8. D9. B10. C11. D12. D13. A14. A15. D16. D17. C

18. B19. C20. B21. C22. B23. C24. A25. B26. B27. B28. C29. A30. B31. B32. C33. A34. C

35. C36. D37. D38. B39. C40. B41. A42. C43. D44. B45. D46. C47. B48. C49. A50. B

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