EXAMINATION PAST PAPERS QUESTION FOR ECON223Question 1. A farmer has 200-cow self-replacing herd. The normal calving percentage is 80 per cent. The mortality rate is 5 per cent on all animals. Male calves are sold as weaners. Twenty (20) cull cows are sold each year. The farmer wants you to work out how many heifers to carry through the system so that he can replace the cull cows.
Complete the livestock reconciliation statement below and report the number of replacement heifers that the farmer requires here.
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
| Category of livestock | Start of year | purchases | Transfer in | births | Total sources |
| No. | No. | No. | from | No. | No. |
| Cows |
| Repl. Heifers |
| Weaner heifers |
| Weaner steers |
| calves |
| total |
| Category of livestock | deaths | Transfers out | sales | End of year | Total uses |
| No. | No. | To | No. | No | No |
| Cows |
| Repl. Heifers |
| Weaner heifers |
| Weaner steer |
| Calves |
| total |
Question 2.Place your answers in the table provided.
Produce a Gross Margin budget using the following information.
The farm has 105 cows in a steady state herd; however, a number of heifers are purchased from outside the farm each year to add to genetic diversity. The farm sells 33 heifers each year for $250 per head. The farm owns five bulls.
Each year 10 heifers are bought for $280 per head. One bull is purchased for $1500 to replace the one old one that was sold for $800. Seventeen cull cows are sold for $320 per head and 43 steers are sold for $270 per head. Animal treatments occur in May and September at the rate of $2.50 per treatment per cow and $3.20 per bull. The cost of treating the 90 calves is half of the amount for cows. Other variable costs are $12 per cow.
Supplementary feed is valued at $160 per tonne for 25 tonnes each year. Marketing and transport costs $5 per head and this is only charged on animals sold from the farm. Industry levies are $4 per head per year for each animal sold.
Rates and insurance cost $1,200 per year. The interest cost is 7 per cent per annum. Management labour is $4,000 per year and casual labour for this activity is $1,500. Depreciation on pumps and irrigation equipment is $115 per year. The vet fees are $600 on average each year.
| Income |
| Expenses |
| Gross Margin |
| Gross Margin per head |
Question 3. Place your answers in the table provided.
Complete the table below for a feed price of $380 per tonne and a weaner price of $1.10 per kilogram. Indicate the optimal range of feed use. State how you would choose the optimal range.
| Input Feed Kg/hd | Output weaner kg/hd | Cost $/hd | Revenue $/hd | Net income $/hd | Marginal input cost (MIC) | Value of marginal product (VMP) |
| 360 | 140 |
| 370 | 152 |
| 380 | 160 |
| 390 | 165 |
| 400 | 168 |
| 410 | 170 |
| 420 | 171 |
| Describe how you would choose the optimal range here. |
Question 4. Place your answers in the table provided at the end of the question
Develop a partial budget for a change in weaner cattle production.
This question has two parts (Parts A and B).
Proposed change: Replace a 90 cow herd producing 39 steers and 40 heifers to be sold at 18 months with a 85 cow herd producing 74 weaners for sale at 9 months. Assume that one bull will be sold.
InformationSteer price $380 per head
Heifer price $410 per head
Weaner price $2.70 per kilogram
Average weaner weight 200 kilograms
Bull $3750 per head
Cows $520 per head
HealthWeaners $15 per head
Heifers $18 per head
Steers $17 per head
Feed costsCows $80 per head per year
Heifers $65 per head per year
Steers $62 per head per year
Bulls $110 per head per year
Weaners $45 per head per year
Labour $60 per head (all age groups)
Interest rate 8 % per annum
4. Part A. Complete the partial budget for the change in enterprise and show the profit/loss expected as a result of the change. Use the gains and losses table provided.
| Losses | Gains |
Extra costs
Total A……………… | Costs save
Total B……………… |
Revenue forgone
Total C…………………….. | Additional revenue
Total D………………………. |
| Net gain |
4 part B. | Calculate the break-even weight for weaners. Show your calculations here. |
Question 5Place your answers in the table provided at the end of the question
A farmer expects to have three activities on her property over the coming year with the following total gross margins (TGMs):
Yearling – expected TGM $55,500
Merino ewes- expected TGM $ 23,000
Barley – expected TGM $ 17,000
She also expects to obtain $4,200 for helping a neighbour with shed hand duties during shearing and $2,000 for part-time work at a restaurant on Fridays and Saturdays.
Expenses for the year are expected to be as follows:
Administration $2,500
Permanent labour $20,000
Fuel and oil $3,000
Repairs and maintenance on machinery and structure $2,200
Rates $1,000
Interest $12,000
The value of her labour $35,000
Opening and closing values for assets and liabilities are:
Assets opening closing Land and improvement $400,000 $450,000
Livestock $80,000 $80,000
Plant and machinery $40,000 $36,000
Other assets $4,000 $4,000
Liabilities Long term loan $200,000 $180,000
Other liabilities $25,000 $0
Using the information above, calculate the following measures of farm performance and state what they mean (i.e. meaning: return to management for their own and the bank's capital investment):
Measure
| Value
($) or (%) | Meaning |
Net farm income
|
Operating return
|
Business return
|
Equity ratio
|
Return total assets
|
Return on equity
|
Question 6. Place your answers in the table provided at the end of the question
1. Use the following table to produce a risk efficient frontier below. Clearly label each axis. (7/20)
2. Identify the stocking rate that you would suggest to a risk averse farmer. (3/20)
3. Explain why you would recommend this stocking rate. (5/20)
4. Indicate the most appropriate stocking rate for a risk-neutral farmer. (5/20)
Stocking
rate | Gross
margin | Standard
deviation |
| 1 | 22 | 2 |
| 2 | 32 | 7 |
| 3 | 43 | 12 |
| 4 | 52 | 18 |
| 5 | 63 | 24 |
| 6 | 67 | 30 |
| 7 | 68 | 37 |
| 8 | 69 | 42 |
| 9 | 67 | 50 |
| Explain your answers here: |
Question 7.Place your answers in the table provided at the end of the question
A producer has 380 ha of cropping land. He is faced with the problem of what summer crop to grow in this area. The two crops he feels are worth considering are sorghum and sunflowers. He considers two factors (events) are beyond his control. These factors are rainfall and commodity prices.
Rainfall Conditions
He assesses that the probability of good rainfall is 0.6 and the probability of bad rainfall is 0.4. If the rainfall is bad, he also has to consider a harvest/do not harvest decision. The cost of harvesting both crops irrespective of yield is $40/ha. The crops have no value to the producer if they are not harvested.
Sale PricesThe probabilities of good and bad prices for both crops are set out below:
| probabilities | Price per tone |
| Sorghum sunflowers | sorghum sunflowers |
| Good price | XXXXXXXXXX | $160 $380 |
| Bad price | 0.3 0.4 | $110 $240 |
Costs of CroppingThe costs of cropping (includes cultivation, seed, fertiliser and sprays but excludes harvesting) are estimated as:
| crop | Cost/ha |
| sorghum | $120 |
| sunflowers | $140 |
YieldsThe farmer estimates the following yield variation given rainfall conditions:
| Rainfall conditions | Yield (tonnes/ha) |
| Sorghum sunflowers |
Good
bad | 2.8 1.9
2.1 0.8 |
Assume you are a consultant to the producer with the problem of choosing which crop to grow and that you know the producer is risk preferring. Use a decision tree diagram to choose whether Sorghum or Sunflower should be planted. Briefly explain your conclusion to the producer.
- Decision Tree
- Decision tree
Question 8Place your answers in the table provided at the end of the question
Linear Programming
Complete the linear programming matrix at the end of the question with the appropriate coefficients and signs for the following information
Labour | Requirements steers ewes lambs oats turnips barleys millet |
Winter (hrs XXXXXXXXXX XXXXXXXXXX
Spring (hrs XXXXXXXXXX XXXXXXXXXX
Summer (hrs XXXXXXXXXX XXXXXXXXXX
Autumn (hrs XXXXXXXXXX XXXXXXXXXX
|
| Feed demand steers ewes lambs |
Winter (kg XXXXXXXXXX
Spring (kg XXXXXXXXXX
Summer (kg XXXXXXXXXX
Autumn (kg XXXXXXXXXX |
| Feed supply oats turnips barley millet |
Winter (kg XXXXXXXXXX
Spring (kg XXXXXXXXXX
Summer (kg XXXXXXXXXX
Autumn (kg XXXXXXXXXX |
| Gross margins steers ewes lambs oats turnips barley millet |
| $ XXXXXXXXXX XXXXXXXXXX -36.74 |
The manager has 800 hours of family labour available in summer, autumn and winter; however, in spring only 750 hours is available. In the district casual labour is worth $14 per hour.
Tasks
1.Fill in the tableau with the values from the above information: be sure to include the correct signs, gross margins and supply values. You are not required to complete a demand column.
2.Complete the constraints for a 2-year crop rotation between oats and barley in the homestead paddock (300 ha).
3.Complete the constraint for turnip and millet production in the South Hill paddock (200ha).
4.Complete the constraint for a maximum of 40 steers.
5.Complete the constraint for a 75 per cent lambing ratio.
6.Complete the constraint for a minimum 200 head of sheep.
7.Show how a maximum of 5 tonnes of feed wheat could be made available in winter at $160 per tonne.
Question 9Place your answers in the table provided at the end of the questionCash Flow BudgetingUsing the following information complete the cash flow budget for the months of January, February and March. Be sure to include GST in the rows provided. GST at the end of December 2006 was negative $2500. The cumulative balance in December was $20,234.
| Month | Jan | Feb | Mar |
| Income |
| Steers | $35,000 |
| Wheat sales | $82,500 |
| Salary for silo work | $2,000 | $2,000 | $2,000 |
| Expenses |
| Replacement bull | $1,600 |
| Animal health | $206 |
| Calf transfers | $3,300 |
| Chemical | $8,320 |
| Rates | $1,300 |
| Fuel and oil | $12,850 |
| School fees | $2,800 |
| telephone | $300 |
| wages | $2,689 | $2,689 | $2,689 |
| electricity | $400 |
| Fencing materials | $5,000 |
| R & M machinery | $550 | $550 | $550 |
| stationary | $7 | $7 | $7 |
| R & M building | $142 | $142 | $142 |
| Bank chargers | $130 |
Cash flow budget XXXXXXXXXX | Dec-06 | Jan-07 | Feb-07 | Mar-07 |
| income |
| GST |
| Total income |
| expenses |
GST
GST Liability
Net cash flow |
| Cumulative balance |