Mr. JKL is considering replacing 250 hectares of maize with 250 hectares of sunflower seed. His expected yield is 3.7 tons per hectare for maize and 2.5 tons per hectare for sunflower. The expected selling prices are R 3 500 per ton for maize and R 5 200 per ton for sunflower. He estimates a variable cost of R 7 350 per hectare for maize and R 8 300 per hectare for sunflower. I. Calculate the expected change in net income for the farmer’s proposed change. II. Briefly advise the farmer if the change is desirable or not.
Mr. JKL is considering replacing 250 hectares of maize with 250 hectares of sunflower seed. His expected yield is 3.7 tons per hectare for maize and 2.5 tons per hectare for sunflower. The expected selling prices are R 3 500 per ton for maize and R 5 200 per ton for sunflower. He estimates a variable cost of R 7 350 per hectare for maize and R 8 300 per hectare for sunflower. I. Calculate the expected change in net income for the farmer’s proposed change. II. Briefly advise the farmer if the change is desirable or not.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Mr. JKL is considering replacing 250 hectares of maize with 250 hectares of sunflower seed. His expected yield is 3.7 tons per hectare for maize and 2.5 tons per hectare for sunflower.
The expected selling prices are R 3 500 per ton for maize and R 5 200 per ton for sunflower. He estimates a
variable cost of R 7 350 per hectare for maize and R 8 300 per hectare for sunflower.
I. Calculate the expected change in net income for the farmer’s proposed change.
II. Briefly advise the farmer if the change is desirable or not.
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