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Whole-Farm Budget

Whole-Farm Budget. Farm Plan Project. The Whole Farm Budget. Gross revenue from each enterprise Product costs (one total) from all enterprises Total hourly labor costs Income from government payments and other sources than the enterprises in the LP Fixed Costs

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Whole-Farm Budget

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  1. Whole-Farm Budget Farm Plan Project

  2. The Whole Farm Budget • Gross revenue from each enterprise • Product costs (one total) from all enterprises • Total hourly labor costs • Income from government payments and other sources than the enterprises in the LP • Fixed Costs • Estimated of Net Farm Income from Operations

  3. Gross Revenue • Take the "level" of the enterprises from your final LP tableau and multiply that number by the gross revenue per unit (acre or head) in the enterprise budget. • Do this for each enterprise that is non-zero. • If an enterprise level is not a whole number, round it to the nearest acre or head.

  4. Production Costs • Remember to round each enterprise level to the nearest whole number. • Calculate total production costs as: (level enterprise 1 X variable costs enterprise 1) + (level enterprise 2 X variable costs enterprise 2) etc. • The variable costs for each enterprise come from the enterprise budgets.

  5. Hourly labor • If you allowed hiring of hourly labor in your second LP, total the number of hours you expect to hire and round to the nearest whole number. • Multiple the total hours by the hourly wage you will pay (which should match what you used in the objective function as a cost. • The sum of production costs and hourly labor expense is your projected variable costs.

  6. Gross Margin from LP Activities • Subtract the projected variable costs from the gross revenue from the enterprises. • Compare this number to the LP objective value. • These numbers should be almost identical, give or take a few dollars for rounding of levels to nearest whole number.

  7. Overall Gross Margin • Use your data from last year to estimate next year's government program payments and other farm income. • Add expected government program payments and other farm income to the gross margin from LP activities to get the overall gross margin.

  8. Fixed Costs • Fixed costs will include: fixed labor cost, fixed interest, property taxes, insurance, and depreciation. • Use last year's data to estimate next year's cost. • For the interest, be sure you include here only the "fixed interest" from your data. Variable interest is included in the estimated production costs.

  9. Projected NFIO • To find the projected NFIO, subtract the fixed costs from the overall gross margin. • Compare this number to your last year's NFIO (on income statement). • Did it increase? If so, was it a substantial increase or a small one? • Did it decrease? If so, why? You'll need to look at prices and yields in the enterprise budget compared to what you received last year.

  10. Whole Farm Budget for Example Farm you can pop this object open to see the calculations.

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