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Partial Budgeting

Partial Budgeting. Added Costs Reduced Returns Sub Total . Added Returns Reduced Costs Sub Total Change in Net Income. Problem #1. Problem #1. Malcolm Garrett, a Montana farmer needs to know if it would be economically advantageous to have his 1,000 acres of wheat custom sprayed.

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Partial Budgeting

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  1. Partial Budgeting

  2. Added Costs Reduced Returns Sub Total Added Returns Reduced Costs Sub Total Change in Net Income Problem #1

  3. Problem #1 • Malcolm Garrett, a Montana farmer needs to know if it would be economically advantageous to have his 1,000 acres of wheat custom sprayed. • Use the following information to complete a partial budget:

  4. Problem #1 • Custom Spray Rate = $4 per acre • Additional Labor Costs for John to show where to spray = $ .15 per acre • Increase in yield due to spraying is 2 bu. Per acre • Wheat is expected to be $3.60 per bu. • John’s Sprayer Wheels will cause 1/2 bu/acre loss of crop.

  5. Problem #1 • Should John Custom Spray?

  6. Added Costs 1,000 x 4 = 4,000 1,000 x .15 = 150 Reduced Returns .5 x 3.60 = 1,800 Sub Total 5,950 Added Returns 2 x 3.60 x 1,000 = 7,200 Reduced Costs Sub Total 7,200 Change in Net Income +1250 Problem #1

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