RIVERA, JOANNE G.

MS AGECON 1

Exercise #4
Farm Planning and Budgeting

Enterprise, partial, whole-farm and cash flow budgets are important and useful
tools of a farm manager, and each provides a framework for the use of these concepts.
Budgeting is often described as “testing it out on paper” before committing
resources to a plan or a change in an existing plan. It is a forward-planning tool or a way
to estimate the profitability or feasibility of a plan, a proposed change in plan or an
enterprise, before making the decision and implementing it. Budget reflects the managers’
best estimate as to what will happen in the future if a certain plan is followed.
The combination of budgeting and economic principles provides some powerful,
practical and useful techniques for the manager to use when analyzing alternatives. This
step is an important one in the decision-making process, because only a proper and
correct analysis will lead to making right decision.

II. Objectives

The main objective of this exercise is for students to gain knowledge and skills in
preparing an enterprise and partial budget.
Specifically, it aims to:

1. Illustrate the different sections of an enterprise and partial budget;

2. Learn how to construct an enterprise and partial budget;
3. Analyze enterprise and partial budget.

III. Enterprise Budget

A certain farmer (MRO Farm) wants to engage in one hectare squash production.
Help him out by completing the tables below and make an enterprise budget (in your
exercise notebook) out of the data showing all the necessary sections. Compute also cost
of production, breakeven price and break-even yield.

A. Schedule of Labor Requirements

Activities Labor Available Labor
Requirement
(MD or MAD) Family Labor Hired Labor TOTAL
No. Amount No. Amount
Land Preparation 10 MAD 0 10 3,000.00 3,000.00
Furrowing 1 MAD 0 1 300.00 300.00
Sowing 4MD 1 200.00 3 600.00 800.00
Weeding 8 MD 2 400.00 6 1,200.00 1,600.00
Interrow Cultivation 4MAD 0 4 1,200.00 1,200.00
Fertilizer Application 6MD 1 200.00 5 1,000.00 1,200.00
Spraying 2MD 0 2 400.00 400.00
Harvesting 15MD 2 400.00 10 2,000.00 2,400.00
Total 10,900.00
MD = P200.00 MAD = P300.00

B. Expected Production
Yield (Tons) Price of Output
EXPECTED(Kgs.) 30 4/kg
Actual 25 5/kg

Note: 1 ton = 1,000 kgs

C. Supplies and Materials
MATERIALS Requirment Price/Unit Amount
A.Seeds ( Hybrid Suprema) 3 x 250 g can 1,800/can 5,400
B.Fertilizer 9,130
i.14-14-14 3 bags 1,150/bag 3,450
ii.46-0-0 1 bag 1,110/bag 1,110
iii.0-0-60 1 bag 1,570/bag 1,570
iv.Chicken Dung 20 bags 150/bag 3,000
C.Pesticides 1,290
i.Insecticides 2 liters 400/li 800
ii.Fungicides 1 kg 350/kg 350
iii.Foliar 1Kg 140/kg 140

MRO FARM
Enterprise Budget

Value per acre

Item (Php)
Revenue 125,000
25 tons @ 5.00 per kgs
Variable Costs
Seed 5,400
Fertilizer 9,130
Pesticides 1,290
Labor 10,900
Total variable cost 26,720
Income above variable cost 98,280
Fixed Costs 0
Total Cost 26,720
Profit 98,280

Cost of Production = Total Cost/Yield

= 26,720/25,000 kgs
= Php 1.07

Break-even Yield = Total Cost/Output Price

= 26,720/5.00
= 5,344 kgs

Break-even Price = Total Cost/Expected Yield

= 26,720/30,000 kgs
= Php 0.89

The actual output of squash production is 25,000 kgs. The calculation would be 26,720/
25,000 = Php 1.07. The break-even price goes up if you produce fewer squash.
D. Choose a particular crop (except corn and squash) and make your own enterprise
budget use actual prices at present.

• Enterprise Budget of Broiler Production

Table1.Sales of Broiler per Cycle

Number of Mortality Total Number Weight Gain Total Weight Price per Total Sales
Heads Raised Rate (%) of Heads per Head (kgs) (kgs) kgs (Php) (Php)
150 5 142 1.3 184.6 160 29,536

Table 2. Cost of Day Old Chicks per Cycle

Items No. of Heads Cost per Day Old Total Cost
Chicks (Php)
(Php)
Broiler Chicks 150 20 3,000

Table 3. Cost of Feeds per Cycle

Type of Feeds Total Feed Consumption Price Total Cost
(kg) (kg) (Php)
Chick Booster Mash 18.9 30 567
Broiler Starter Crumble 189 30 5,670
Broiler Finisher Crumble 162 29 4,698
Total 10,935

Table 3. Cost of Supplies and Veterinary Drugs per Cycle

Items Qty Unit Unit Cost Total Cost
(Php) (Php)
Production Supplies
Light Bulb 3 pcs 40 120
Waterer 6 pcs 50 300
Powdered Soap 2 sachet 7 14
Major D 2 pc 25 50
Total Production Supplies 484
Office Supplies
Ball pen 1 pc 8 8
Receipts 1 pc 8 8
Ledger 1 pc 25 25
Record Book 1 pc 40 40
Journal 1 pc 25 25
Total Office Supplies 106
Veterinary Drugs
Electrolytes 2 pcs 16 32
Multivitamins 15 pcs 20 300
Total Veterinary Products 332
Total 922

Table 3. Cost of Labor per Cycle

Personnel Number of Personnel Number of Working Days Total Labor Cost
(Php)
Caretaker 1 35 1,000
 ANNE’s Broiler Production
Enterprise Budget per Cycle

Value per
cycle
Item (Php)
Revenue 29,536
184.60 kgs (142 heads) @160 per kgs
Variable Costs
Day Old Chicks 3,000
Feeds 10,935
Supplies 590
Production 484
Office 106
Veterinary Drugs 332
Labor 1,000
Total variable cost 15,857
Income above variable cost 6,295
Fixed Costs
Rent 1,000
Total fixed cost 1,000
Income above fixed cost 21,152
Total Cost 16,857
Profit 12,679
IV. Partial Budget

Make a partial budget showing the change in net farm income resulting from
extending the age of disposal of 100 heads broiler from 28days to 35days using the
following assumptions:

1. Average weekly weight gain ……………………. O.30kg/head

2. Price of live weight chicken ………………………P150.00/Kg
3. Feed Consumption
No. of Days Kind of Feed No. of Feeding Feed Consumption
(Days) (Kilograms)
1–9 Booster 9 22
10 – 21 Starter Crumble 12 200
22 – 28 Finisher 7 20
29 - 35 Finisher 7 50
Booster P35/Kg; Starter Crumble P30/kg Finisher P30/Kg

4. Veterinary Drugs ……………………………………P100/wk

5. Light …………………………………………………..P500/mo.
6. Water ………………………………………………… P 350/mo.
7. Hired Labor ………………………………………….. P 200/day
8. Manure Sales 4 sacks/mo. ………………………... P200/sack
9. Mortality …………………………………………….. 1%

Partial Budget: Extension of Disposal from 28 days to 35 days of Broiler Production,

100 heads with 1% mortality rate (99 heads)

Additional Costs Additional Revenue

Variable Cost Sales, weight gain 4,455
Labor 1,400 0.3 kgs/head @ 150/kg
Veterinary Drugs 100

Reduce Revenue Reduce Costs

None None

A. Total additional costs B. Total additional revenue

and reduced revenue 1,500 and reduced costs 4,455

Net Change in Profit (B-A) 2,955