2004 Missouri FFA
Farm Management Contest
2004 MISSOURI FFA FARM MANAGEMENT CONTEST
Multiple Choice Section
The Farm Management Contest is designed to test student understanding of the
application of economic principles in farm management. Each question is worth
three (3) points.
Choose the best answer and mark the appropriate box on the score sheet. There
is only one correct answer to each question.
1. You must use the mid-quarter convention of depreciation if
more than what percent of 3-, 5-, 7-, 10-, 15-, and 20-year
property is acquired in the fourth quarter?
A. 33%
B. 40%
C. 50%
D. 65%
E. None of the above
2. The maximum annual contribution to an IRA is $3,000 per person for
someone under age 50 and ___________ for someone age 50 or older.
A. $3,000
B. $3,250
C. $3,500
D. $4,000
E. None of the above
3. By contributing the maximum amount to a Roth IRA, a 40-year-old
farmer will reduce his taxable income by
A. $0.
B. $2,000.
C. $3,000.
D. $3,500.
E. None of the above
4. A farmer is liquid if
A. he has sufficient current assets to cover current debts.
B. he has sufficient equity to cover current debts.
C. he has sufficient assets to cover all debts.
D. he can pay all debts with all equity.
E. All of the above
5. You buy seed beans having 2550 seeds per pound. The directions
state to drill at the rate of 3 beans per foot with a 7-inch spaced
drill. How many 50-pound bags will you need for a 35-acre field?
(There are 43,560 sq. ft. in an acre.)
A. 25 bags
B. 34 1/2 bags
C. 51 bags
D. 61 1/2 bags
E. None of the above
6. A cattle buyer purchases 35 head of steers which average
1,177 pounds for $70.50/cwt. He trucks them 282 miles to a
slaughter plant where he sells them on a carcass basis for
$1.04 per pound. His trucking and handling costs are $441.
What average carcass weight does he need in order to break
even?
A. 799 pounds
B. 810 pounds
C. 826 pounds
D. 853 pounds
E. None of the above
7. Herbicide is usually applied to weeds and grasses around the
farmstead as a 2% solution. How many ounces of herbicide
should be added to a 2 1/2 gallon sprayer to make a 2% solution?
(One gallon contains 128 oz.)
A. 2.0 ounces
B. 5.0 ounces
C. 6.4 ounces
D. 10.3 ounces
E. None of the above
8. As a cattle buyer you buy 50 choice steers weighing 1,210 pounds on
average. If they yield 62%, how much would the average carcass weigh?
A. 694.4 pounds
B. 712.3 pounds
C. 750.2 pounds
D. 806.5 pounds
E. None of the above
9. A farmer obtains 4-ton hay yields and 12-ton corn silage yields. His
cash costs of production are $30 per ton of hay and $14 per ton of corn
silage. One pound of hay will substitute for 2 pounds of corn silage
and not affect rate of gain. What proportion of hay and silage should
this farmer raise for cattle feed?
A. Grow 2 acres of corn silage for each acre of hay.
B. Grow 3 acres of hay for each acre of corn silage.
C. Grow only corn silage.
D. Grow only hay.
E. Not enough information given.
10. When budgeting a corn production enterprise, land ownership costs are
considered to be
A. a variable cost.
B. a depreciable cost.
C. an operating cost.
D. a fixed cost.
E. None of the above
11. Marginal revenue and marginal cost are useful concepts in determining
the profit maximizing output level. Profit will be at its maximum level
A. where marginal revenue is at its maximum level and marginal
cost is 0.
B. where marginal revenue is 0 and marginal cost is at its maximum.
C. where marginal revenue equals marginal cost.
D. where marginal revenue is at its minimum and marginal cost
is at its maximum.
12. If both demand and supply increased equally for an agricultural product,
what will be the results on the quantity of the product sold and the price
received?
A. The same quantity will be sold at the same price.
B. An increased quantity will be sold at a lower price.
C. An increased quantity will be sold at a higher price.
D. An increased quantity will be sold at the same price.
E. None of the above
13. When a farmer borrows money to purchase land, he usually must offer the
title to the property as security until the debt has been repaid. This
credit instrument is commonly referred to as a
A. sales contract.
B. promissory note.
C. mortgage.
D. check.
E. None of the above
14. A decline in the value of total farm assets will
A. increase the rate of return to equity.
B. increase the rate of return to assets.
C. increase the capital turnover ratio.
D. all of the above.
E. None of the above
15. The increase in wheat yield becomes smaller for each additional 10
pounds of nitrogen fertilizer applied after 30 pounds per acre have
been applied. This is an example of
A. increasing marginal returns.
B. unprofitable use of fertilizer.
C. diminishing marginal physical product.
D. stage 3 of production.
E. None of the above
16. Which of the following causes a shift in the demand for beef?
A. A decrease in cattle numbers
B. Increased cost of producing beef
C. Increased number of cattle producers
D. Increased income of consumers
E. All of the above
17. The demand curve shows the relationship between
A. consumer tastes and the quantity demanded.
B. price and the quantity demanded.
C. price and production costs.
D. money income and quantity demanded.
E. None of the above
18. Current assets minus current liabilities equals
A. net worth.
B. net working capital.
C. net farm income.
D. gross income.
E. None of the above
19. If corn silage as fed contains 65% moisture and 2.4% protein, the dry
matter would be what percent protein?
A. 2.50
B. 5.71
C. 6.86
D. 7.14
E. None of the above
20. Farmer Brown purchases a new tractor. A record keeping system which
records both the addition to equipment and the reduction of cash is
called
A. income statement.
B. dual effect.
C. balance sheet.
D. double entry.
E. None of the above
21. The cost of producing one additional unit of output is called
A. opportunity cost.
B. substitution cost.
C. average cost.
D. marginal cost.
E. None of the above
22. A farmer purchases 700-pound feeder steers for $0.85 per pound and
plans to sell the steers at 1100 pounds. The farmer estimates the
total cost of gain to be $0.53 per pound. The nearest breakeven
price when the steers are sold at 1100 pounds is
A. $0.607/pound.
B. $0.705/pound.
C. $0.734/pound.
D. $0.767/pound.
E. None of the above
23. A farmer has total assets of $500,000 of which land is $300,000. The
farmer's debt:equity ratio is 1.0. What will the farmer's
debt:equity ratio be if the lender devalues the land by 15%?
A. .64
B. .88
C. 1.14
D. 1.22
E. None of the above
24. How many total acres are included in "SW 1/4 of NE 1/4 and S 1/2 of
NW 1/4 of Section 15, Twp. 10 N, R 4W of the 5th Principle Meridian"?
A. 80 acres
B. 120 acres
C. 160 acres
D. 320 acres
E. None of the above
25. How much perimeter fence would be required to completely enclose the
parcel of land described in the question above?
A. 1.0 mile
B. 1.5 miles
C. 2.0 miles
D. 2.5 miles
E. None of the above
26. The role of price in a free market is to serve as a guide
A. in controlling quantity supplied.
B. in limiting quantity demanded.
C. in allocating consumption.
D. in deciding what, when, and how much to produce.
E. All of the above
27. A farmer is solvent if
A. he has sufficient current assets to cover current debts.
B. he has sufficient equity to cover debts.
C. he has sufficient assets to cover all debts.
D. he can pay all debts with all equity.
E. All of the above
28. A Subchapter S corporation can have no more than
A. 10 shareholders.
B. 15 shareholders.
C. 35 shareholders.
D. 75 shareholders.
E. There is no limit on number of shareholders.
29. Corn has an expected yield of 120 bushels per acre and has a
production cost of $140.00 per acre. Expected market prices are
$3.00 per bushel for corn and $9.00 per bushel for soybeans.
Soybeans can be raised at a production cost of $110 per acre. At
what break-even yield per acre would soybeans generate the same net
return per acre as dryland corn?
A. 31.9 bushels
B. 35.2 bushels
C. 36.7 bushels
D. 42.0 bushels
E. None of the above
30. Purchase of a call option on corn means the buyer
A. is required to sell a corn futures contract at a set price.
B. may sell, but is not required to sell, a corn futures
contract at a set price.
C. may buy, but is not required to buy, a corn futures contract
at a set price.
D. is required to buy a corn futures contract at a set price.
E. None of the above
31. A soybean producer decides to store his soybeans in the local
elevator for 4 months. The price at harvest is $6.00 per bushel and
the elevator charges 2 cents per bushel per month for storage plus a
5 cent per bushel handling charge. He has 4,000 bushels to sell and
must borrow $24,000 at 8% annual interest while he stores the
soybeans. What price must he receive for his soybeans to break even
and cover his storage and opportunity costs?
A. $6.13
B. $6.21
C. $6.24
D. $6.29
E. None of the above
32. How many pounds of 48% protein supplement must be mixed with 8%
protein corn to make a ton of 16% protein feed?
A. 300 pounds
B. 400 pounds
C. 550 pounds
D. 600 pounds
E. None of the above
33. The capital gains taxes that would be due should a farmer sell his
land is an example of a
A. current liability.
B. long-term liability.
C. deductible expense.
D. contingent liability.
E. None of the above
34. A firm should shut down in the short-run if it cannot cover its
A. fixed costs.
B. total costs.
C. variable costs.
D. time costs.
E. overhead costs.
35. A feedlot operator buys feeder steers, finishes them, and sells them.
The operator estimates that finished steers will sell for $75 per
cwt. and that it will cost $170 per head to bring them from the 750
pound purchase weight to the 1100 pound selling weight. What is the
highest price the operator can pay for 750 pound feeder steers to
break even?
A. $70.25/cwt.
B. $76.14/cwt.
C. $80.00/cwt.
D. $87.33/cwt.
E. None of the above
36. A part-time farmer has 160 acres of land, 40 cows and can only work
400 hours per year on his farm. An acre of corn requires 3 hours of
labor and yields 80 bushels. An acre of beans take 2 hours and yields
30 bushels. Each cow needs 8 hours of labor, 3 acres of land, and
consumes 16 bushels of corn. What is the maximum number of acres of
soybeans he can grow if the farmer keeps 40 cows and does not buy any
corn?
A. 28
B. 32
C. 64
D. 94
E. None of the above
37. A vicious cold spell in the late spring has wiped out the buds on the
peach trees grown in Georgia, a major peach producing state. How
will this freeze impact the price received for peaches by Maryland
peach producers?
A. No effect -- Georgia is too far away to have any impact on
Maryland.
B. Will lower the price because the demand for peaches will be
lower.
C. Because of the reduced supply, prices for peaches in
Maryland will tend to move upward.
D. No effect -- Maryland does not grow enough peaches to have
any impact on prices.
E. None of the above
38. During the year, a farmer pays $1,800 principal and $500 interest on
a tractor loan. His annual depreciation is $2,000. His deductible
operating expenses (fuel, oil, repairs, etc) associated with
operating the tractor totaled $500. His marginal tax rate is 30%.
What is his after-tax cash cost of using the tractor for the year?
A. $ 750
B. $1,900
C. $2,050
D. $3,600
E. None of the above
39. A written agreement by which an owner of property transfers title to
someone for the benefit of beneficiaries is a
A. trust.
B. partnership.
C. corporation.
D. sole proprietorship.
E. None of the above
40. A producer sells 9 feeder steers for $78/cwt. The average weight per
steer is 700 pounds. There is a 2.5% sales commission and yardage
fees of $2.30 per head. The net amount received for the pen of
steers would be
A. $4,256.20
B. $4,240.80
C. $4,618.00
D. $4,770.45
E. None of the above
41. The price of widgets changes from $100 to $90 and, as a result, the
quantity demanded increases from 50 to 60 units. From this we can
conclude that
A. the demand for widgets is elastic.
B. the demand for widgets is inelastic.
C. the demand for widgets is of unit elasticity.
D. the demand for widgets has declined.
E. None of the above
42. In analysis of a farm, what would you do if a cash flow projection
indicated that there would be more expense than income in a certain
month?
A. Terminate the enterprise causing the cash flow problem that
month.
B. Use savings, delay expenses, move up sales, or borrow money.
C. Change from cash to accrual accounting method.
D. Change depreciation methods.
E. None of the above
43. If the total cost of producing 100 units of output is $500 and the
average variable cost is equal to $1, then which of the following
statements is true?
A. Total variable cost of the 100 units is $400.
B. Total fixed cost is equal to $100.
C. Average fixed cost is equal to $4.
D. Average total cost is equal to $4.
E. None of the above is true.
44. If the price of a September Put option is higher today than
yesterday, then one would expect that the price of a September
futures contract is
A. higher today than yesterday.
B. lower today than yesterday.
C. unchanged from yesterday.
D. either up or down. There is no relationship between futures prices and
prices of options
E. None of the above
45. Which of the following would not appear on a cash flow statement?
A. Interest paid on a loan for a tractor
B. Principal paid on a loan for a tractor
C. Depreciation expense on a tractor
D. Rental payment received from the neighbor who used the tractor.
E. None of the above
46. Frank expects his wheat to yield 40 bushels per acre and sell for
$4.00 per bushel. He has spent $75 per acre on seed, fertilizer,
fuel, and chemicals so far as of January 1. It will cost $10 per
acre to harvest and deliver the wheat to market. Right now he could
only get $3.00 per bushel for the wheat. His balance sheet asset
entry should reflect
A. the $75 per acre he has spent so far.
B. the $160 per acre he expects to receive when sold.
C. $120 based on today's price.
D. the $160 per acre minus the $75 spent so far and minus the
$10 per acre to harvest the wheat.
E. None of the above
47. An increase in total operating costs of $20 per acre will increase
the break-even price of the crop by how much if the yield is 100
units per acre?
A. $0.02 per unit
B. $0.20 per unit
C. $2.00 per unit
D. $20.00 per unit
E. None of the above
48. How many bushels of corn are in a metric tonne?
A. 33.3
B. 35.7
C. 36.7
D. 39.4
E. None of the above
49. The maximum amount that can be claimed as a Section 179 expense deduction
on your 2003 tax return is
A. $17,500.
B. $20,000.
C. $24,000.
D. $100,000.
E. None of the above
50. Liability of a limited partner in a limited partnership is limited to
A. all debts and obligations of the partnership up to the amount of his
investment in the partnership.
B. a maximum of 50% of obligations of the partnership.
C. all debts and obligations of the partnership.
D. all debts and obligations of the partnership up to double the amount
of his share of the assets in the partnership.
E. None of the above
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2004 MISSOURI FFA FARM MANAGEMENT CONTEST
Problems Section
Choose the best answer and mark the corresponding numbered space on the answer
sheet. Computations may be done in the margins or on the back of the paper.
Each question is worth four (4) points. There is only one correct answer for
each question.
PROBLEM I - Market Value Balance Sheet
Using the information below, complete the net worth statement for January 1,2004:
Land. . . . . . . . . . . . . . . . . . . . $750,000
House . . . . . . . . . . . . . . . . . . 140,000
Machinery and equipment. . . . . . . . . .. 112,000
Cows . . . . . . . . . . . . . . . . . .. . 40,000
Calves . . . . . . . . . . . . . . . . . . 37,000
Accounts payable . . . . . . . . . . . . . 7,652
Autos. . . . . . . . . . . . . . . . . . . 39,400
Sows and boars . . . . . . . . . . . . . . 22,000
Market hogs . . . . . . . . . . . . . . . . . 65,000
Checking and savings . . . . . . . . . . . . 17,761
Soybeans . . . . . . . . . . . . . . . . . . . 9,900
Hog buildings . . . . . . . . . . . . . . . 74,000
Feed and hay . . . . . . . . . . . . . . . . . 10,150
Accounts receivable. . . . . . . . . . . . . 12,500
Accrued interest owed. . . . . . . . . . . . . 23,175
Accrued taxes owed . . . . . . . . . . . . . . 7,700
30-year land loan balance is $262,500.
$12,500 plus interest is due March 1 of each year.
5-year combine loan balance is $29,250.
$9,750 plus interest is due August 31 of each year.
20-year home loan balance is $59,500.
$3,500 plus interest is due each September.
Current Assets: Current Liabilities:
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
Total _______________ Total __________________
Non-current Assets: Non-current Liabilities:
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
Total _______________ Total ________________
Total Assets ________________ Total Liabilities ________________
Net Worth _________________
Questions 1 through 7 refer to PROBLEM I
1. The total value of current assets on January 1, 2004, was
A. $130,311
B. $152,311
C. $170,311
D. $179,811
E. None of the above
2. The total value of non-current assets was
A. $1,115,400
B. $1,137,400
C. $1,155,400
D. $1,177,400
E. None of the above
3. The total value of current liabilities was
A. $19,820
B. $58,347
C. $60,847
D. $64,277
E. None of the above
4. The total value of non-current liabilities was
A. $325,500
B. $338,000
C. $351,250
D. $354,750
E. None of the above
5. The net worth was
A. $852,224
B. $880,260
C. $1,177,400
D. $1,207,711
E. None of the above
6. The current ratio was
A. 0.30
B. 0.42
C. 2.14
D. 2.37
E. None of the above
7. What would the value of farm production need to be in order to have
a capital turnover ratio of 0.4?
A. $375,973.60
B. $470,960.00
C. $531,884.40
D. $2,144,835.00
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following corn budget to answer Questions 8 through 16.
CORN FOR GRAIN, circular sprinkler system, 20" water, custom harvest (combine
& hauling), shallow electric 50' well, 30' lift, 900 gpm
_____________________________________________________________________________
Operating Inputs Units Price Qty. Value Your Value
Corn seed Lbs. 1.40 21.30 $ 29.82 __________
Nitrogen (N) Lbs. 0.25 200.00 50.00 __________
Phosphate (P2O5) Lbs. 0.11 50.00 5.50 __________
Custom harvest Acre 19.00 1.00 19.00 __________
Custom hauling Bu. 0.05 180.00 9.00 __________
Rent fert. spreader/ac. Acre 2.44 3.00 7.32 __________
Pre-plant insecticide Acre 22.80 1.00 22.80 __________
Post-plant insecticide Acre 21.60 1.00 21.60 __________
Pre-emerge herbicide Acre 17.34 1.00 17.34 __________
Post-emerge herbicide Acre 18.12 1.00 18.12 __________
Annual operating capital Dol. 0.10 70.00 7.00 __________
Machinery labor Hour 6.00 1.96 11.76 __________
Irrigation labor Hour 6.00 0.96 5.76 __________
Mach. fuel, lube, repair Dol. 16.39 __________
Irrig. fuel, lube, repair Dol. 39.00 __________
Total operating costs $280.41 __________
Fixed costs
Machinery: Amount Value
Interest at 10% 145.50 14.55 __________
Depr., taxes, insurance 16.89 __________
Irrigation:
Interest at 10% 234.20 23.42 __________
Depr., taxes, insurance 26.00 __________
Total fixed costs 80.86 __________
Production Units Price Qty. Value
Corn Bu. 2.00 180.00 360.00 __________
Total receipts 360.00 __________
Returns above total operating costs 79.59 __________
Returns above all specified costs -1.27 __________
______________________________________________________________________________
8. The return above total operating cost per acre is:
A. -$1.27
B. $79.59
C. $280.41
D. $360.00
E. None of the above
9. How many hours of labor are budgeted per acre?
A. 1.96
B. 2.92
C. 12.00
D. 17.52
E. None of the above
10. What is the total budgeted interest cost per acre?
A. $14.55
B. $37.97
C. $44.97
D. $379.70
E. None of the above
11. If a 50-pound bag of seed corn has 74,000 kernels, how many seeds are
being planted per acre?
A. 21,300
B. 29,820
C. 31,524
D. 31,950
E. None of the above
12. What is the total specified fertilization cost per acre? (ignore cost
of labor and operating capital)
A. $50.00
B. $55.50
C. $62.82
D. $250.00
E. None of the above
13. How many bushels of corn are required to cover the specified
irrigation costs per acre?
A. 22.38
B. 24.71
C. 47.09
D. 94.18
E. None of the above
14. What yield will cause returns above all specified costs to equal zero?
A. 175.1 bu.
B. 180.6 bu.
C. 182.5 bu.
D. 186.3 bu.
E. None of the above
15. What will be the per acre returns above all specified costs if one-
third of the crop must be given to the landlord for rent of the land?
A. -$121.27
B. -$101.27
C. -$80.86
D. -$41.68
E. None of the above
16. If one-third of the crop is given as rent, what price received for corn
will make the per acre receipts above all specified costs equal zero?
A. $2.63
B. $2.71
C. $3.01
D. $3.04
E. None of the above
PROBLEM III - Income Tax Management
Use the tables at the end of this exam to calculate depreciation on the
following item.
On March 15, 2003, Bill traded tractors. The old tractor had market value of
$15,000 and a zero remaining undepreciated book value. Bill paid $40,000
"boot" in the trade for the new tractor.
17. The tractor is
A. 3-year property
B. 5-year property
C. 7-year property
D. 10-year property
E. None of the above
18. If Bill does not expense any of the cost of the tractor and does not
claim the special 30% first year allowance, what will 2003
depreciation be? (use regular MACRS and mid-year convention)
A. $2,400.36
B. $4,285.60
C. $5,892.70
D. $6,428.40
E. None of the above
19. If Bill expenses $20,000 on the tractor trade and claims the special
30% first year allowance and uses the mid-quarter convention and
regular MACRS, the 1/1/04 remaining book value of the new tractor
will be
A. $11,375.00
B. $12,932.46
C. $19,906.25
D. $22,750.00
E. None of the above
20. If Bill does not expense or claim the 30% special first year allowance
and uses the mid-year convention and straight line depreciation over the
alternate MACRS life, his 2003 depreciation will be which of the following:
A. $2,000
B. $2,600
C. $2,750
D. $4,000
E. None of the above
21. If Bill uses regular MACRS, then the first year the tractor will appear
on Bill's January balance sheet with a zero book value will be in
A. 2008.
B. 2009.
C. 2010.
D. 2011.
E. None of the above
22. Under MACRS, a farm fence is classified as
A. 7-year property
B. 10-year property
C. 15-year property
D. 20-year property
E. None of the above
PROBLEM IV -- Supply and Demand
2004 Missouri FFA Farm Management Graph for Exam
The above graph represents the supply of soybeans (S), the demand for soybeans
in the U.S. (DUS), the demand for soybeans for export (DF), and the total
demand of for soybeans (DT).
23. What is the market equilibrium price of soybeans in the U.S.?
A. P1
B. P2
C. P3
D. P4
E. None of the above
24. At the market equilibrium price, how much soybeans will be used in
the U.S.?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
25. At the market equilibrium price, how much soybeans will be exported?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. Without foreign demand, the equilibrium price of soybeans would be
A. P1
B. P2
C. P3
D. P4
E. P5
For Questions 27 and 28, include foreign demand and assume imports from Brazil
cause the supply to increase from S to S1
27. The increased supply of soybeans should cause soybean demand to
A. shift to the left and up.
B. shift to the right and down.
C. not change.
D. None of the above
28. Soybeans imports would cause
A. exports of soybeans to go up.
B. the equilibrium price of soybeans to go down.
C. Both of the above
D. the foreign demand for soybeans to shift left.
E. None of the above
PROBLEM V - Marketing
On July 10, a farmer has 10,000 bushels of wheat in his bins. He sells it on
January 15. Ignore commissions, storage cost, and interest.
July 10 quotes: January 15 quotes:
March futures price = $3.70 March futures price = $3.50
Expected basis = $0.10 under the board Basis = $0.05 under the board
Strike ---- Premiums ---- ---- Premiums ----
price Call Put Call Put
$3.10 $0.73 $0.01 $0.58 $0.01
$3.20 $0.63 $0.02 $0.48 $0.02
$3.30 $0.53 $0.03 $0.38 $0.04
$3.40 $0.43 $0.08 $0.28 $0.11
$3.50 $0.33 $0.15 $0.19 $0.19
$3.60 $0.24 $0.24 $0.12 $0.29
29. What is the cash price of wheat on January 15?
A. $3.40
B. $3.45
C. $3.50
D. $3.60
E. None of the above
30. If the farmer sold two futures contracts on July 10 and bought back
the contracts on January 15, what would be the realized price per
bushel (cash + net on futures) for the wheat?
A. $3.25
B. $3.40
C. $3.65
D. $3.85
E. None of the above
31. If the farmer bought two $3.40 Puts on July 10 and sold the Puts on
January 15, what would be the realized price per bushel (cash + net
on options) for his wheat?
A. $3.37
B. $3.43
C. $3.48
D. $3.51
E. None of the above
32. If the farmer bought two $3.40 Puts and sold two $3.40 Calls on July
10, and sold the Puts and bought back the Calls on January 15, what
would be the realized price per bushel (cash + net on options) for
his wheat?
A. $3.46
B. $3.58
C. $3.63
D. $3.81
E. None of the above
33. Given all the information above, which of the following actions taken
on July 10 turned out to be the most profitable?
A. Selling two futures contracts.
B. Buying two $3.40 Put options.
C. Buying two $3.40 Puts and selling two $3.40 Calls.
D. Selling the wheat on July 10.
E. Taking no market action.
PROBLEM VI - Loan Payments
Loan Amortization: You have a $10,000 loan to be paid back over 7 periods in
equal payments.
Outstanding Payment Payment
Principal Loan Portion Portion
Period before Payment Payment Interest Principal
1 $10,000.00 $1,855.53 A $1,155.53
2 $8,844.47 $1,855.53 $619.11 $1,236.42
3 $7,608.05 $1,855.53 $532.56 B
4 $6,285.08 $1,855.53 $439.95 $1,415.58
5 C $1,855.53 $340.86 $1,514.67
6 $3,354.83 $1,855.53 $234.84 D
7 $1,734.14 $1,855.53 $121.39 $1,734.14
34. The value of A is
A. $700.00
B. $709.22
C. $712.86
D. $720.15
E. None of the above
35. The value for C is
A. $4,851.75
B. $4,869.50
C. $4,894.66
D. $4,907.18
E. None of the above
36. What is the outstanding principal after the seventh payment?
A. -$121.39
B. $0
C. $121.39
D. $1,734.14
E. None of the above
37. What interest rate is used for this loan?
A. 7.00%
B. 7.75%
C. 8.23%
D. 17.74%
E. None of the above
38. Using the table on the previous page, what is the present
value of an annuity of $1,855.53 for 5 years?
A. $6,285.08
B. $7,608.05
C. $8,112.14
D. $9,277.65
E. None of the above
39. At the beginning of last year, a farmer had an outstanding loan for
$217,475. The interest rate was 8% APR. If the farmer made one loan
payment at the end of the year of $45,000, what was the outstanding
balance at the end of the year?
A. $17,398
B. $189,873
C. $199,873
D. $204,228
E. None of the above
40. On April 1, 2001, Anne borrowed $25,000 to plant soybeans. On
November 1, 2001, she repaid the $25,000 along with $1,239.58
interest. What annual interest rate did she pay?
A. 8.50%
B. 9.25%
C. 9.75%
D. 10.50%
E. None of the above
PROBLEM VII - Diminishing Returns
A farmer is looking at a precision ag firm that can apply fertilizer in 10 lb.
increments. The cost of fertilizer is $0.45/lb. Corn is selling for $2.50
per bushel. He has one field that is a mix of Soils A and B. The field is
100 acres with 40 acres of Soil A and 60 acres of Soil B. He has determined
that his yields will respond according to the following table.
Fertilizer Soil A yld. Soil B yld.
lbs./ac. bu./ac. bu./ac.
120 100 120
130 105 128
140 108 134
150 110 138
160 111 141
170 112 143
41. How much fertilizer should he apply per acre if he fertilizes the
entire field based on Soil Type A?
A. 130 lbs.
B. 140 lbs.
C. 150 lbs.
D. 160 lbs.
E. None of the above
42. What are his net returns above fertilizer cost for the entire field
if he fertilizes the entire field based on Soil A?
A. $14,160
B. $17,760
C. $19,180
D. $24,950
E. None of the above
43. How much fertilizer should he apply per acre if he fertilizes the
entire field based on Soil Type B?
A. 140 lbs.
B. 150 lbs.
C. 160 lbs.
D. 170 lbs.
E. None of the above
44. What are his net returns above fertilizer cost for the entire field
if he fertilizes the entire field based on Soil B?
A. $16,980
B. $17,700
C. $18,690
D. $25,000
E. None of the above
45. What are his net returns above fertilizer cost for the entire field
if he fertilizes by applying the profit maximizing amount on each
soil type?
A. $25,025
B. $25,060
C. $25,100
D. $25,160
E. None of the above
46. What are his net returns above fertilizer cost for the entire field
if he applies 160 pounds per acre on all 100 acres?
A. $24,550
B. $24,875
C. $25,050
D. $25,125
E. None of the above
PROBLEM VIII - Partial Budgeting
Frank Frogfarmer is having financial problems with his farm being able to
provide the level of net income desired. He is considering switching a cow-
calf enterprise to a yearling enterprise. Having successfully completed four
years of Agricultural Education in Snake Navel High School, this enterprising
young rancher decided to use a partial budget technique to determine if the
change should be made.
He estimated he would have a 2% death loss which would allow him to sell 196
head of yearlings weighing 750 pounds each at $87 per hundredweight. Total
labor associated with the yearling enterprise is $3,200. He estimated feeder
calves would cost $505/head and consume $1,800 of supplemental feed. Interest
charge on the investment associated with the yearling enterprise is $3,800.
He must purchase a $5,500 piece of new equipment for the yearling enterprise
(figure annual charges at 10% of purchase price).
Mr. Frogfarmer determined annual costs for the cow-calf enterprise to be:
(a) feed -- $3,600; (b) a replacement bull at $1,200/year; (c) labor --
$5,400; and (d) interest on cow herd investment -- $7,000. In addition to a
reduction in the previous listed costs associated with the cow-calf herd,
receipts would be reduced by $34,220 per year.
Use the space below to determine if the change in enterprises should be made.
Additional Receipts:
Sale of yearlings 47. $___________
Reduced Costs:
Labor $____________
Feed ____________
Replacement bulls ____________
Interest ____________
Subtotal 48. $____________
Total of additional receipts and reduced costs $____________
Additional Costs:
Labor $____________
Feed ____________
Cattle purchases ____________
Equipment charges ____________
Interest ____________
Subtotal 49. $____________
Reduced Receipts:
Calves, cows, bulls $____________
Total additional costs and reduced receipts $____________
Net change in income 50. $____________
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47. If Frank Frogfarmer makes the change to backgrounding feeder calves,
his additional receipts will be:
A. $79,000
B. $101,000
C. $127,890
D. $140,000
E. None of the above
48. Frank's reduced costs will be:
A. $10,200
B. $17,200
C. $18,400
D. $25,400
E. None of the above
49. The additional costs associated with this change are
A. $108,330
B. $110,350
C. $122,436
D. $142,360
E. None of the above
50. Net change in income will be
A. a gain of more than $1,000.
B. a gain of less than $1,000.
C. a loss of more than $1,000.
D. a loss of less than $1,000.
E. None of the above
ANNUAL DEPRECIATION PERCENTAGES FOR 5-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 15.000% 26.250% 18.750% 11.250% 3.750%
2 25.500 22.125 24.375 26.625 28.875
3 17.850 16.520 17,062 18.637 20.212
4-5 16.660 16.520 16.763 16.567 16.404
6 8.330 2.065 6.287 10.354 14.355
Total 100.000 100.000 100.000 100.000 100.000
_________________________________________________________________
ANNUAL DEPRECIATION PERCENTAGES FOR 7-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 10.714% 18.750% 13.393% 8.036% 2.679%
2 19.133 17.411 18.559 19.707 20.854
3 15.033 13.680 14.582 15.484 16.386
4 12.249 12.160 12.221 12.275 12.874
5-7 12.249 12.160 12.221 12.275 12.182
8 6.124 1.520 4.582 7.673 10.661
Total 100.000 100.000 100.000 100.000 100.000
_________________________________________________________________
ANNUAL FRACTIONS FOR STRAIGHT LINE OVER N YEARS (N less than 26)
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 1/2 7/8 5/8 3/8 1/8
2-N 1 1 1 1 1
N+1 1/2 1/8 3/8 5/8 7/8
_________________________________________________________________
Depreciation formula: Basis divided by N times number from above
table.
ANNUAL FRACTIONS FOR 27 1/2 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax Month Placed in Service --
Year 1 2 3 4 5 6 7 8 9 10 11 12
1 11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-27 12 12 12 12 12 12 12 12 12 12 12 12
28 6.5 7.5 8.5 9.5 10.5 11.5 12 12 12 12 12 12
29 -- -- -- -- -- -- 0.5 1.5 2.5 3.5 4.5 5.5
_________________________________________________________________
Depreciation formula: Basis divided by 27 1/2 divided by 12 times
number from above table.
ANNUAL FRACTIONS FOR 39 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax Month Placed in Service --
Year 1 2 3 4 5 6 7 8 9 10 11 12
1 11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-39 12 12 12 12 12 12 12 12 12 12 12 12
40 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5
_________________________________________________________________
Depreciation formula: Basis divided by 39 divided by 12 times number
from above table.
-----------------------------------------------------------------------
2004 STATE FFA FARM MANAGEMENT CONTEST
Key
Multiple Choice
1. B 11. C 21. D 31. D 41. A
2. C 12. D 22. C 32. B 42. B
3. A 13. C 23. D 33. D 43. C
4. A 14. D 24. B 34. C 44. B
5. D 15. C 25. C 35. D 45. C
6. B 16. D 26. E 36. A 46. A
7. C 17. B 27. C 37. C 47. B
8. C 18. B 28. D 38. B 48. D
9. C 19. C 29. C 39. A 49. D
10. D 20. D 30. C 40. D 50. A
Problems
1. B 11. C 21. D 31. C 41. C
2. D 12. C 22. A 32. C 42. D
3. D 13. C 23. D 33. A 43. D
4. A 14. B 24. B 34. A 44. D
5. E 15. A 25. A 35. B 45. D
6. D 16. C 26. B 36. B 46. C
7. C 17. C 27. C 37. A 47. C
8. B 18. B 28. C 38. B 48. B
9. B 19. A 29. B 39. B 49. B
10. C 20. A 30. C 40. A 50. B