1997 District 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.
Please place your answers in the appropriate box on the score
sheet provided. There is only one correct answer to each
question.
1. A farmer purchases 500-pound feeder steers for 75 cents per pound
and plans to sell the steers at 800 pounds. The farmer
estimates the total cost of gain to be 55 cents per pound. The
nearest breakeven price when the steers are sold at 800
pounds is
A. 58.13 cents/pound
B. 64.75 cents/pound
C. 67.50 cents/pound
D. 76.78 cents/pound
E. None of the above
2. How many total acres are included in "NE 1/4 of SW 1/4 and S
1/2 of SW 1/4 of Section 15, Twp. 10N, R4W of the 5th
Principle Meridian"?
A. 80 acres
B. 120 acres
C. 160 acres
D. 320 acres
E. None of the above
3. How much perimeter fence would be required to completely
enclose the parcel of land described in question 3?
A. 1.0 mile
B. 1.5 miles
C. 2.0 miles
D. 2.5 miles
E. None of the above
4. On April 1, 1996, Lynn borrowed $25,000 to buy seed and
fertilizer. On December 1, 1996, she repaid the $25,000
along with $1533.25 interest. What annual interest rate did
she pay?
A. 9.20%
B. 9.75%
C. 10.50%
D. 11.75%
E. None of the above
5. A farmer should issue an IRS Form 1099 for which of the
following?
A. $750 paid to a neighbor for hay.
B. $500 paid to a neighbor for custom work.
C. $1500 paid to a neighbor for a bull.
D. $650 paid to a neighbor for land rent.
E. All of the above
6. An LLC (Limited Liability Company) is usually
A. taxed like a corporation.
B. taxed like a partnership.
C. not for profit and therefore not taxed.
D. illegal in Missouri.
E. None of the above
7. The IRS form used to calculate self-employment tax is
A. Schedule D.
B. Form 4797.
C. Form 4562.
D. Schedule SE.
E. None of the above
8. To consider the time value of money in analyzing alternative
farm investments, one should choose the investment with the
A. highest net present value.
B. largest net cash flow over the lifetime of the
investment.
C. highest average profits over the investment lifetime.
D. lowest cost.
E. None of the above
9. The primary purpose of the current ratio is to
A. determine tax liabilities.
B. determine short-run farm profitability.
C. determine the current relationship of production and
marketing activities.
D. determine ability to meet immediate financial
obligations.
E. None of the above
10. 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 45%. What is his after-tax
cash cost of using the tractor for the year?
A. $1,450
B. $1,600
C. $2,050
D. $2,250
E. None of the above
11. Liquidity is best described as
A. the ability to meet cash obligations as they come
due.
B. total assets minus total liabilities.
C. having no long-term debt.
D. the rate of capital turnover.
E. None of the above
12. A farmer has total assets of $600,000 of which land is
$300,000. The farmer's debt:equity ratio is 0.5. What will
the farmer's debt:equity ratio be if the value of land
inflates by 10%?
A. 0.465
B. 0.545
C. 0.610
D. 0.890
E. None of the above
13. If the U.S. wheat industry has an inelastic demand curve, a
reduction in the amount of wheat supplied to the market would
A. have no effect on total revenues in the wheat
industry.
B. increase the total revenues in the wheat industry.
C. decrease the total revenues in the wheat industry.
D. cause a sharp increase in the demand for wheat.
E. None of the above
14. A farmer traded a tractor with an adjusted tax basis of
$15,000. The new tractor had a list price of $50,000. The
dealer allowed a $20,000 trade-in for the old tractor. The
farmer paid $5,000 of his own money and borrowed $25,000 to
pay the balance. What is the tax basis of the new tractor?
A. $35,000
B. $40,000
C. $45,000
D. $50,000
E. None of the above
15. A soybean producer decides to store his soybeans in the local
elevator for four months. The price at harvest is $7.50 per
bushel and the elevator charges 2 cents per bushel per month for
storage plus a 5 cents per bushel handling charge. He has 5,000
bushels to sell and must borrow $37,500 at 9% 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. $7.355
B. $7.725
C. $7.805
D. $7.855
E. None of the above
16. A farmer is purchasing a new baler at a cost of $24,000. His
dealer will finance the baler under the following terms: 15%
down payment with the balance repaid in equal payments over
the next five years at 7% APR. The farmer expects the baler
to last for 7 years and have a salvage value of $5,000. How
much interest will the farmer pay the first year of the loan?
A. $1,428
B. $1,680
C. $1,728
D. $2,340
E. None of the above
17. An increase in the value of the U.S. dollar relative to the
currency of other countries should result in
A. more costly imports.
B. less costly imports.
C. increased exports.
D. no effect on imports or exports.
E. None of the above
18.If the interest rate is 10%, what is the present value of a
dollar to be received by a producer three years from now?
A. $0.751
B. $0.826
C. $0.900
D. $1.100
E. None of the above
19. On November 10 John bought 200 head of steers at $67.00 per
cwt. The futures market on that day quoted $70.00 per cwt.
on an April contract. John expects the cash price to be
about $60.00 per cwt. in April when he plans to sell his
steers. On November 10 John should
A. wait until April to sell a futures contract.
B. buy an April futures contract.
C. wait until April to buy a futures contract.
D. sell an April futures contract.
E. None of the above
20. A patronage dividend is
A. paid to stockholders of large companies out of the
company's profits.
B. a refund made to members of a cooperative and is
based upon their volume of business with the
cooperative.
C. a form of rent paid to a landlord in exchange for
pasture land.
D. the interest earned on a savings account.
E. None of the above
21. Wheat yields 40 bushels per acre and the price is $4.00 per
bushel. The price of canola is $0.10 per pound. The cost of
production is $150 per acre for wheat and $160 per acre for
canola. What yield would be needed from canola to give the
same net returns as wheat?
A. 1,255 pounds
B. 1,545 pounds
C. 1,600 pounds
D. 1,700 pounds
E. None of the above
22. A grain farmer who normally stores his soybeans at a local
elevator has decided to use the options market to create a
synthetic storage. To do so he will sell his beans at
harvest and
A. buy a put option.
B. sell a put option.
C. buy a call option.
D. sell a call option.
E. None of the above
23. If the grain farmer in the above problem suffers a loss on
his options contract, then this loss will be taxed as
A. an ordinary loss.
B. a capital loss.
C. a non-deductible farm expense.
D. a personal expense.
E. None of the above
24. Farmer Jones has $10,000 in equipment he uses exclusively for
corn. He assumes that this equipment will last 4 years and
have a salvage value of $0. He plans to plant 100 acres of
corn each year. Assuming an interest rate of 8%, what will
be his average fixed costs per year for the next 4 years
(depreciation and interest) for this machinery per acre of
corn?
A. $10
B. $20
C. $25
D. $29
E. None of the above
25. In 1996, Pat Parker had net farm income of $55,000. Pat had
total business assets of $760,000 and total liabilities of
$450,000. Pat paid $38,000 in interest. Rate of return on
assets for 1996 would be
A. 8.5%
B. 11.3%
C. 12.2%
D. 14.0%
E. None of the above
26. How many pounds of 48% protein supplement must be mixed with
7% protein corn to make a ton of 18% protein feed?
A. 321 pounds
B. 400 pounds
C. 439 pounds
D. 537 pounds
E. None of the above
27. A feedlot operator buys feeder steers, finishes them, and
sells them. The operator estimates that finished steers will
sell for $65 per cwt. and that it will cost $185 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. $61.73/cwt.
B. $70.67/cwt.
C. $76.14/cwt.
D. $82.50/cwt.
E. None of the above
28. What will the breakeven bid price for 750 pound feeder steers
be in the above question if high priced corn causes feeding
costs to increase to $285 per head?
A. $57.33/cwt.
B. $62.45/cwt.
C. $66.14/cwt.
D. $378/head
E. None of the above
29. A farmer has a debt : worth ratio of 1 : 2. The current
liabilities total $50,000 and the non-current liabilities
total $90,000. What is the value of the assets?
A. $420,000
B. $210,000
C. $140,000
D. $70,000
E. None of the above
30. A cattle feeding operation has sales of $60,000, feed
purchases of $40,000, other costs of $2,000, an opening
inventory of $40,000, and a closing inventory of $42,000.
What is the net farm income for this operation on an accrual
basis?
A. $2,000
B. $10,000
C. $18,000
D. $20,000
E. None of the above
31. Which of the following is considered Schedule F farm income?
A. Cull breeding stock
B. Crop sales
C. Sales of farm equipment
D. Sale of land
E. Both A & B
32. A $1 deductible expense (before tax) will cost ______ after
tax if the farmer's marginal tax rate is 35%.
A. $0.00
B. $0.35
C. $0.65
D. $1.00
E. None of the above
33. Your ability to pay all debts if you liquidate your business
is called
A. current ratio.
B. equity.
C. solvency.
D. investment ratio.
E. None of the above
34. A farmer who wants to have the right, but not the obligation,
to buy a particular commodity at a specified price level,
would use a
A. cash forward contract.
B. basis contract.
C. call option.
D. put option.
E. None of the above
35. A $50,000 loan is amortized at 10% interest for 8 years
yields annual payments of $9,372.07. How much of the first
year's payment is principal?
A. $4,000.00
B. $4,372.07
C. $4,604.30
D. $5,000.00
E. None of the above
36. For the above loan of $50,000, if the eighth and final
payment includes $852.00 of interest, what was the
outstanding principal balance after the seventh payment?
A. $8,181.44
B. $8,520.07
C. $8,731.20
D. $8,892.87
E. None of the above
37. For the above loan of $50,000, how much total interest is
paid over the life of the loan?
A. $15,604.49
B. $17,230.10
C. $24,976.56
D. $74,976.56
E. None of the above
38. Partial budgeting permits a farm manager to
A. calculate profit for the entire farm business.
B. calculate the change in profit from a proposed change
which does not affect the entire farm organization.
C. calculate the change in profit from a proposed change
which affects the entire farm organization.
D. calculate total profit from a single enterprise.
E. None of the above
39. If corn silage as fed contains 65% moisture and 2.5% protein,
the dry matter would be what percent protein?
A. 3.85
B. 5.71
C. 6.58
D. 7.14
E. None of the above
40. The main difference between cash and accrual accounting is
that accrual accounting includes
A. a charge for unpaid family labor.
B. depreciation.
C. an adjustment for changes in inventory.
D. sales of capital assets.
E. None of the above
_________________________________________________________________
1997 DISTRICT FFA FARM MANAGEMENT CONTEST
Problems Section
For the following problems, place your answer for each question
in 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 - Balance Sheet
The Farm Financial Standards Task Force has recommended that farm
balance sheets be prepared with two time classifications --
current and non-current. Items that had been classified as
Intermediate or Long-term are now classified as non-current.
Using the information below, complete the net worth statement for
January 1, 1997:
Land . . . . . . . . . . . . . . . . $375,000
Autos . . . . . . . . . . . . . . . 21,000
Machinery and equipment. . . . . . . 95,000
Cows . . . . . . . . . . . . . . . . 50,000
Calves . . . . . . . . . . . . . . . 12,000
Sows and boars . . . . . . . . . . . 15,000
Market hogs . . . . . . . . . . . . 62,000
Checking and savings . . . . . . . . 9,415
House. . . . . . . . . . . . . . . . 96,000
Hog buildings . . . . . . . . . . . 105,000
Feed and hay . . . . . . . . . . . . 14,250
Accrued interest owed. . . . . . . . 13,750
Accrued taxes owed . . . . . . . . . 7,400
30-year land loan balance is $165,000.
$9,000 plus interest is due March 1 of each year.
7-year building loan balance is $55,000.
$11,000 plus interest is due October 1 of each year.
20-year home loan balance is $52,400.
$5,100 plus interest is due each December 1.
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, 1997, was:
A. $ 83,385
B. $ 85,635
C. $ 97,665
D. $112,635
E. None of the above
2. The total value of non-current assets was:
A. $692,000
B. $707,000
C. $742,000
D. $757,000
E. None of the above
3. The total value of current liabilities was:
A. $21,150
B. $30,150
C. $41,150
D. $46,250
E. None of the above
4. The total value of non-current liabilities was:
A. $247,300
B. $252,400
C. $258,300
D. $272,400
E. None of the above
5. The net worth was:
A. $442,665
B. $465,415
C. $500,515
D. $561,115
E. None of the above
6. The current ratio was:
A. 0.474
B. 2.112
C. 2.702
D. 5.705
E. None of the above
7. The debt to worth ratio was:
A. 0.523
B. 0.612
C. 0.745
D. 1.633
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following cow-calf budget to answer Questions 8 through
16.
_________________________________________________________________
COW-CALF, SPRING CALVING, WARM SEASON PASTURE
COST/RETURN PER COW - RANCH SIZE UNIT
WINTER DM IS 25% NON-LEGUME HAY
Operating Inputs Units Price Quantity Value
Non-legume hay Lbs 0.05 964.00 48.20
41-45% prot. sup. Lbs 0.13 299.00 38.87
19-20% pro. feed Lbs 0.08 376.00 29.36
Salt & minerals Lbs 0.10 30.00 3.00
Summer pasture AUMS 8.43 8.01 67.52
Winter dry past. AUMS 8.43 3.53 29.76
Vet service Hd 14.65 1.00 14.65
Vet-md-ls-supplies Hd 2.80 1.00 2.80
Marketing expense Cwt 1.75 4.32 7.56
Personal taxes Hd 5.30 1.00 5.30
Herd bulls Cwt 85.00 0.12 10.31
Hauling Cwt 0.35 4.32 1.51
Annual operating capital Dol 0.11 152.47 16.07
Machinery labor Hr 6.00 4.57 27.44
Equipment labor Hr 6.00 0.04 0.25
Livestock labor Hr 6.00 5.33 31.98
Mach fuel, lube, repair Dol 27.30
Equip fuel, lube, repair Dol 1.18
Total Operating Costs 363.07
____________________________________
Fixed Costs Amount Value
Machinery
Interest @ 10.675% 54.58 5.83
Depr, taxes, insurance 10.69
Equipment
Interest @ 10.675% 13.43 1.43
Depr, taxes, insurance 2.59
Livestock
Beef cow 720.00
Bull 40.50
Beef heifer 60.00
Interest @ 10.675% 3.40 87.95
Depr, taxes, insurance 10.47
Total Fixed Costs 118.96
______________________________________
Production Units Price Quantity Value
Str calves (4-5) Cwt 87.00 1.92 167.28
Hfr calves (4-5) Cwt 79.00 1.27 100.01
Commercial cows Cwt 41.00 0.87 35.79
Aged bulls Cwt 51.00 0.14 6.93
Heifers (600-700) Cwt 72.00 0.12 8.71
Total Receipts 318.73
_______________________________________
Returns above total operating costs -44.34
Returns above all specified costs -163.30
_________________________________________________________________
88% calf crop at 210 days. 2 yr fch; 1000# mature cows
2% death loss excluded in cow sales
3% shrink off cattle wts.
8. Total operating cost per cow is:
A. $ 71.14
B. $118.96
C. $318.73
D. $363.07
E. None of the above
9. The return above total operating cost per cow is:
A. -$163.30
B. -$ 44.34
C. $318.73
D. $363.07
E. None of the above
10. How many hours of labor are budgeted per cow?
A. 4.574
B. 5.330
C. 9.946
D. 31.980
E. None of the above
11. What is the total budgeted interest cost per cow?
A. $ 5.83
B. $ 7.26
C. $ 23.33
D. $111.28
E. None of the above
12. What price per ton is paid for hay?
A. $ 5.00
B. $ 48.20
C. $100.00
D. $964.00
E. None of the above
13. What are the per cow pasture costs?
A. $16.86
B. $29.76
C. $67.52
D. $97.28
E. None of the above
14. How many tons of hay are fed per cow?
A. 0.15
B. 0.48
C. 48.20
D. 964.0
E. None of the above
15. The largest cost category in this budget is for
A. labor.
B. hay.
C. pasture.
D. interest.
E. None of the above
16. The price of cattle must increase by what percent in order
to cover all costs?
A. 13.91%
B. 21.04%
C. 37.32%
D. 51.23%
E. None of the above
PROBLEM III -- Income Tax Management
Use the following tables to calculate depreciation on the
following item.
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 5.5 7.5 8.5 9.5 10.5 11.5
_________________________________________________________________
Depreciation formula: Basis divided by 39 divided by 12 times
number from above table.
On March 5, 1996, Sam traded corn planters. The old planter had
a remaining undepreciated value of $4,812. Sam paid $20,000
"boot" in the trade for the new planter.
17. The planter is:
A. 3-year property
B. 5-year property
C. 7-year property
D. 10-year property
E. None of the above
18. If Sam does not expense any of the cost of the planter,
then 1996 depreciation will be (use regular MACRS and mid-
year convention):
A. $1,607.10
B. $2,122.66
C. $2,658.36
D. $3,288.50
E. None of the above
19. If Sam expenses the maximum on the planter trade, and uses
the mid-quarter convention and regular MACRS, then 1996
depreciation will be:
A. $ 309.65
B. $ 433.50
C. $ 644.47
D. $1,371.00
E. None of the above
20. If Sam does not expense and uses the mid-year convention
and straight line depreciation over the alternate MACRS
life, his 1996 depreciation will be:
A. $ 990.60
B. $1,240.60
C. $1,981.20
D. $2,830.29
E. None of the above
21. In order to use the mid-quarter convention, at least
______ percent of Sam's 1996 purchases of depreciable
property must have been made in the fourth quarter.
A. 60%
B. 50%
C. 40%
D. 33%
E. None of the above
22. Under MACRS, a swine farrowing house 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
(insert graph)
The above graph represents the current supply of corn in the U.S.
(S), the expected supply of corn once the new higher yielding
varieties are introduced later this decade (S1), the foreign
demand for U.S. corn (DF), the domestic demand for U.S. corn
(DUS), and the total demand for U.S. corn (DT).
For questions 23-25, use the current corn supply (S).
23. What is the market equilibrium price of corn 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 corn 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 corn will be
exported?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. Without foreign demand, the equilibrium price of corn
would be
A. P1
B. P2
C. P3
D. P4
E. None of the above
For questions 27 and 28, assume new corn varieties increase
supply from S to S1.
27. The change in supply will cause the market equilibrium
price to
A. increase.
B. decrease.
C. not change.
D. None of the above
28. With the new varieties, U.S. corn exports should
A. increase.
B. decrease.
C. stay the same.
D. None of the above
PROBLEM V - Marketing
In January, a farmer has 5,000 bushels of soybeans in the bin.
He sells the soybeans on
June 15. Ignore storage, commissions, and interest.
January 15 quotes: June 15 quotes:
July futures price = $6.80 July futures price = $6.50
Expected basis = $0.40 Basis = $0.30 under the board
under the board
Strike ---- Premiums ---- ---- Premiums ----
price Call Put Call Put
$5.00 $1.25 $0.05 $1.40 $0.01
$5.50 $0.81 $0.15 $0.90 $0.02
$6.00 $0.37 $0.25 $0.55 $0.08
$6.50 $0.25 $0.55 $0.15 $0.21
$7.00 $0.15 $1.05 $0.05 $0.55
29. What is the cash price of soybeans on June 15?
A. $6.20
B. $6.25
C. $6.50
D. $6.75
E. None of the above
30. If the farmer sold a futures contract on January 15 and
bought back the contract on June 15, what would be the
realized price per bushel (cash + net on futures) for his
soybeans?
A. $5.95
B. $6.50
C. $6.55
D. $6.80
E. None of the above
31. If the farmer bought a $6.50 Put on January 15 and sold
the Put on June 15, what would be the realized price per
bushel (cash + net on options) for his soybeans?
A. $5.86
B. $5.91
C. $6.25
D. $6.59
E. None of the above
32. If the farmer bought a $6.50 Put and sold a $6.50 Call on
January 15, and sold the Put and bought back the Call on
June 15, what would be the realized price per bushel (cash
+ net on options) for his soybeans?
A. $5.96
B. $6.01
C. $6.24
D. $6.49
E. None of the above
33. Given all the information above, which of the following
actions taken on January 15 turned out to be the most
profitable?
A. Selling a futures contract.
B. Buying a $6.50 Put option.
C. Buying a $6.50 Put and selling a $6.50 Call.
D. Taking no market action.
PROBLEM VI - Investment Analysis
In February 1996, Junior Jones purchased his mother's 240-acre
farm. The farm is entirely in pasture and hay. Junior is trying
to decide whether he should continue to rent the farm to a
neighbor who has been paying $4,800 per year pasture rent, or to
buy feeder cattle and graze the land himself. Junior figures
there is enough pasture to support 120 steers from April until
October.
34. Junior can buy some 600 pound steers for $75 per cwt.
What will be his capital cost for 120 steers?
A. $ 7,200
B. $ 9,000
C. $31,500
D. $54,000
E. None of the above
35. Junior will have the hay custom baled. He has 30 acres of
alfalfa which averages 5 tons per acre. He can get it
baled and put in the barn for $50 per ton. What will his
hay cost be?
A. $1,600
B. $3,200
C. $7,500
D. $8,000
E. None of the above
36. Junior figures he can sell the hay in January for $80 per
ton. What will be his expected net return to the hay
land?
A. $ 4,500
B. $ 6,000
C. $ 7,500
D. $12,000
E. None of the above
37. Junior figures it will require 2.5 hours per calf to take
care of the steers. But, since he enjoys working with
cattle, he only puts a value of $7 per hour on his labor.
What will be the annual charge for his labor?
A. $ 17.50
B. $ 840
C. $2,100
D. $2,600
E. None of the above
38. Junior figures he will have a 5% death loss and market the
calves at 850 pounds for 70 cents per pound. What is his
expected gross income?
A. $56,525
B. $59,500
C. $67,830
D. $71,400
E. None of the above
39. Junior estimates that minerals, veterinary, taxes,
insurance, trucking, interest, and other miscellaneous
costs will amount to $65 per steer purchased. These costs
total to
A. $1,500
B. $2,000
C. $4,200
D. $7,800
E. None of the above
40. Using the costs and returns identified above, Junior
should
A. rent the pasture for $4,800.
B. get into the cattle business.
________________________________________________________________
1997 DISTRICT FFA FARM MANAGEMENT CONTEST
Key
Multiple Choice
1. C 11. A 21. D 31. B
2. B 12. A 22. C 32. C
3. C 13. B 23. B 33. C
4. A 14. C 24. D 34. C
5. D 15. D 25. C 35. B
6. B 16. A 26. D 36. B
7. D 17. B 27. B 37. C
8. A 18. A 28. A 38. B
9. D 19. D 29. A 39. D
10. A 20. B 30. D 40. C
Problems
1. C 11. D 21. C 31. A
2. D 12. C 22. B 32. A
3. D 13. D 23. D 33. A
4. A 14. B 24. B 34. D
5. D 15. D 25. A 35. C
6. B 16. D 26. B 36. A
7. A 17. C 27. B 37. C
8. D 18. C 28. A 38. C
9. B 19. D 29. A 39. D
10. C 20. B 30. B 40. B