Chapter 18 Enterprise Analysis

For a farm in which alfalfa hay is raised and fed to dairy cattle, to analyze alfalfa as a separate enterprise, the value of the hay fed should be recorded as:

• an expense to alfalfa and income to dairy

• an expense to dairy and income to alfalfa

• an asset to alfalfa and a liability to dairy

• an asset to dairy and a liability to alfalfa

The most accurate method of allocating machinery fixed costs among crop enterprises is in proportion to:

• the number of acres planted to each crop

• the gross income generated by each crop

• the bushels produced by each crop

• the actual hours which the machinery is used on each crop

Enterprise accounting shows the net farm income earned from:

• each major asset on the farm

• each type of production activity of the farm

• each employee on the farm

• each week during the year

All of the following are “uses” for grain inventory except:

• bushels produced

• bushels sold

• bushels saved for seed

• bushels fed to livestock

When grain marketing is considered as a separate enterprise from producing the grain, the “cost” of the grain going into to the enterprise should be estimated as:

• its total cost of production through harvest

• its variable cost of production through harvest

• the cash price it could have been sold for at harvest

• the futures price it could have been sold for at harvest (hedge price)

A producer with multiple units of cash rented land can best compare their profitability based on:

• crop yields obtained on each unit

• amount of cash rent paid on each unit

• cost of production per bushel obtained on each unit

• net return over variable costs and rent obtained on each unit

Income and expenses can be allocated to the various crop enterprises produced on a farm most accurately by

• assigning each transaction an enterprise code when it is entered and sorting on them after the last transaction occurs

• dividing them up at the end of the accounting year

• using enterprise budgets from the state extension service as a guide

• assigning them in proportion to the number of acres of each crop the farm grows

An enterprise that provides services to other enterprises on the same farm but does not generate any outside revenue is called:

• a profit center

• a service center

• a cost center

• a revenue center

The most important use for enterprise analysis on a farm or ranch is:

• to compare the profitability of the different crops and types of livestock being produced

• to determine how much labor is being used on each enterprise

• to determine how much net profit to report on each year’s income tax return

• to evaluate the financial solvency of the total farm business

Crediting one enterprise with the value of a product that is used as an input by another enterprise on the same farm is called:

• a value-added enterprise

• an internal transaction

• a profit center

• a cost center