Question 4 – Day & French Farmers
Charles Day and Jack French are in partnership as farmers in the East Riding of Yorkshire.
One of their enterprises is a pig unit of 100 sows. The output from the unit – piglets are sold on to Stonehill Farms at 23 kgs live-weight for £35 per unit of output.
You are a mobile book-keeper administrator with a number of farmers as clients. You visit Day and French on a monthly basis.
The following is the budgeted profit statement for the pig unit for year ended 30 June 2000:
Budgeted Profit Statement
| | £ |
| | |
| Sales (2400 units @ £35) | 84000 |
|
| |
| Operating Expenses: | |
| | |
| Wages | 12000 |
| Feedstuffs: Boars and Sows | 19550 |
| Weaners (output) | 20975 |
| Heat, Light and Power | 1250 |
| Vet and Medicine | 800 |
| Miscellaneous Expenses | 1200 |
| Office Expenses (inc | 1000 |
| Insurances | 2100 |
| Repairs and Maintenance | 1500 |
| Depreciation | 9450 |
| | 69825 |
|
| |
| Profit or (Loss) | £14175 |
On a recent visit to the farm Charles Day asks you what knowledge you have of cost classification, behaviour and break-even point.
It is your opinion that the only true variable cost is the feedstuff for the output.
Questions
1. Prepare an analysis of costs to the following two categories: fixed costs and variable costs.
(10 marks)
2. Prepare a schedule to show the total of fixed and variable costs. (10 marks)
3. Calculate the break-even point in both units of output and value of turnover. (10 marks)
4. Prepare a profit volume graph to show break-even point in units. (10 marks)
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