What is a gross margin?

A gross margin is a formula that indicates the percentage ratio of revenue you keep for
each sale after all costs are deducted. The gross profit margin percentage is
represented through this formula:
Gross Profit Margin = (Revenue – Cost of Goods Sold) / Revenue x 100.

Why are gross margins useful to farms?

 Gross profit margins are incredibly useful to a farm, as it gives a solid percentage on
their profit. This can be compared to other competitive farms and strategic alterations
may be implentted to maximize the farms profit.
 Gross profit margins are also vital to ensure that a farmer’s profit earned is enough to
cater for their needs.

Find an example of a gross margin for a dairy farm and describe

An example of a gross margin on a dairy farm is when deciding to sell beef cattle’s meat.
When selling, a farmer has many things to consider, including if customers will buy it over
other competitions, and if the profit earned would be enough to supply for themselves, their
potential family, and farm management bills. A gross profit margin would be able to solve
these issues, and by providing the simple percentage, a farmer can evaluate if the meat
prices need to change.

Create a table of FIXED COSTS and VARIABLE COSTS for a dairy farm?

Fixed Cost Variable Cost

 Water Bills  Fertilizer - nitrogens + other gaseous fertilizers

 Rent
 Electricity Bills
 Animal Health
 Insurance
 Taxes
 salaries payable
 Lease costs
 Interest paid
 Property taxes
 Telephone Bills
 Wifi Costs
 Data Costs
 Satelite Costs
 Grains and pellets (for feeding)
 Hay, silage, other supplements, etc
 Other optimized food options
 Pasture maintenance
 Irrigation
 Machinery operating
 Casual labour
 Fuel
 Oil
 Vehicle Repairs
 Casual labour
 Animal Vaccination
 Bug Spray
 Weed Spray

Costs - The total variable cost for $1 094 100, and gross profit margin costs to $1 492 310.
For more information about individual variable costs, view the image below.
Farm Management Terms

Capital – money. Assets, accumulated wealth

Management – administration of a business usually carried out by a manager

Total fixed costs – the sum of all fixed costs or overhead costs. Eg rates/taxes/administration costs.
They change with the operation size

Operator’s allowance – the manager salary or other perks

Total income – the income included from all produce sales

1st farm income – Total income – fixed costs – variable costs