Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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| 1. | What
factor might increase the demand of U.S. wheat? a. | wheat crop failures in Argentina and
Russia | b. | increasing bread prices | c. | lower wheat
prices | d. | none of these | | |
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| 2. |
Jason has a
fixed cost of $2 and a projected variable cost of $.50 per bag of cabbage. The best price he
can contract for a week before planting time is $2.25 a bag and it is too late to shift to another
enterprise. Unfortunately, the projected price over the next few years is no better. What
is your advise to Jason? a. | Produce this year -- look for another crop for next
season. | c. | Plant only
one-half of what he had planned. | b. | Quit now!!! | d. | Plant one-quarter of what he had
planned. | | | | |
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| 3. | What
should be included in the net worth calculation? a. | The value of equipment. | c. | Checking account balance | b. | Savings account
balance. | d. | all the
above. | | | | |
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| 4. |
If all other
factors remain the same and the supply of a product goes up, then the price of that product will
probably: a. |
fall. | c. | remain the
same. | b. | rise. | d. | go up, then back down dramatically. | | | | |
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| 5. | If
swine producers are making an unusually high profit then: a. | other producers
will enter the swine production business | c. | the supply of pork will go up | b. | the profit
margin will eventually go down | d. | all the
above | | | | |
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| 6. |
Each of the following businesses have one type government intervention
as noted. Based only on this information, which would most likely be
profitable?
A. Business A - the Government controls
production & restricts
imports.
B. Business B - the Government
restricts exports.
C. Business C - the Government sponsors
a consumer group to regulate
prices.
D. Business D - the Government loans
money at low interest to
producers. a. | Business A - the
Government controls production & restricts imports. | c. | Business C - the Government sponsors a consumer group to
regulate prices. | b. | Business B - the Government restricts
exports | d. | Business D - the
Government loans money at low interest to producers. | | | | |
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| 7. |
Hedgers and speculators in the futures market are similar in that
they: a. | are both
interested in making a profit | c. | both have a
product to sell. | b. | are both accepting risk. | d. | all the above. | | | | |
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| 8. | Good
reasons to borrow money include: a. | increased returns are greater than the cost of borrowing
money | c. | he money can be
used for any purpose.
| b. | the money can be secured at a very low interest
rate. | d. | it can be used
to increase the volume of business. | | | | |
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| 9. |
Pam said, "I paid $12,000 for this truck two years ago and would
like to sell it for $10,000, but I know it has ________ more than that." a. | appreciated | c. | increased in
value | b. | depreciated | d. | hedged | | | | |
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| 10. |
Which of the following items would most likely result in a loss for a
vegetable producer who decides not to plant anything this year because of low
prices? a. | chemicals | c. | seed | b. | depreciation | d. | fertilizer | | | | |
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| 11. | Which
items are most readily converted into cash without loss? a. | current
assets | c. | intermediate or
working liabilities | b. | intermediate or working assets | d. | fixed or long term assets | | | | |
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| 12. |
Maynard thinks he really has a no-lose deal this time, so he borrowed
money at the current high interest rate to increase his acreage. Which statement is true about
his decision? a. | He has increased
his leverage. | c. | both the
above | b. | He has increased his risk | d. | none of the above
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| 13. | A
lease between a tenant and a landlord should: a. | be in writing. | c. | state the type of crops to produce | b. | be in writing
unless it is between family members | d. | be an oral agreement stated in a clear, loud
voice. | | | | |
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| 14. | An
appropriate use for long-term credit is to: a. | purchase breeding stock | c. | purchase land and buildings. | b. | purchase
feed | d. | purchase
fertilizer and seeds | | | | |
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| 15. |
Other things being equal, a decrease in the amount of an agricultural
commodity offered for sale will result
in: a. | a lower
price. | c. | no change in
price | b. | a higher price | d. | none of the above | | | | |
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| 16. | A
business owned and managed by one person is called a: a. | sole
proprietorship | c. | limited
partnership | b. | partnership | d. | corporation | | | | |
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| 17. | Select the item that is not deductible on Federal Income Tax returns. a. | depreciation | c. | feed
costs | b. | principle payments | d. | interest payments | | | | |
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| 18. | Government farm programs: a. | always favor the small farmer | c. | always increase farm income | b. | are disliked by
all farmers | d. | have changed
often over time | | | | |
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| 19. |
Depreciation is best defined as:
A. an alternative for
investment credit.
B. a depletion technique used for breeding
animals.
C. an allowance for wear, tear, and
obsolescence.
D. a technique to reduce
taxes.
a. | an alternative
for investment credit | c. | an allowance for
wear, tear, and obsolescence | b. | a depletion technique used for breeding
animals. | d. | a technique to
reduce taxes | | | | |
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| 20. | When
using published enterprise budgets, a producer should: a. | use the format
and procedures but none of the exact numbers. | c. | modify the budgets to suit his
situation. | b. | use the numbers and procedures as set by the
experts | d. | none of the
above | | | | |
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| 21. |
Daryl purchased a tract of land and the owner agreed to finance the
purchase. The loan was amortized over ten years but a clause in the contract called for the
loan balance to come due at the end of five years. This particular type loan is called a ______
loan. a. | front
end | c. | third
mortgage | b. | balloon | d. | second mortgage | | | | |
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| 22. | Farm
budgets differ from farm records in that: a. | records are a history of what has happened; budgets are a
projection of what will happen. | b. | records are not used for tax purposes; budgets
are | c. | budgets are a
history of what has happened; records are a projection of what will happen. | d. | records are
simple and easy to keep, while budgets are difficult and very
time-consuming. | | |
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| 23. | The
speculator is important in the futures market because he: a. | profits from
price changes. | c. | does not
try to avoid losses. | b. | accepts the price risk the hedger is seeking to
avoid. | d. | none of the
above | | | | |
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| 24. | Magruder Farms Inc. presently has current liabilities in the amount of $10,000,
intermediate liabilities of $50,000 and long term liabilities of $225,000. In order for the
business to be considered solvent, total assets must be greater than ________. a. | $225,000 | c. | $175,000 | b. | $125,000 | d. | $285,000 | | | | |
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| 25. | How
much will the yearly depreciation be if you use the straight line depreciation method for a computer
system costing $3,500 with a seven year life? a. | $500 | c. | $450 | b. | $700 | d. | $350 | | | | |
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| 26. | Mr.
Johnson harvested corn in October, 1986. He stored the corn and sold it in May, 1987.
With the accounting method he uses, he did not report the value of the corn as income on his 1986 tax
return but will report it as income in 1987. His accounting method must be: a. | the
capitalization method. | c. | the amortization
method. | b. | the cash method. | d. | the accrual method | | | | |
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| 27. | Matthew will have some timber available to sell in December, 1987. His income
for 1987 is going to be about $40,000 but his estimated income for 1988 is $20,000 because his wife
plans to quit work to begin a family. With no significant changes in the tax law between 1987
and 1988, he will probably be better off to: a. | defer the sale of the timber until
1988 | c. | ell the timber
in 1987. | b. | ask his wife not to work in 1987 or
1988. | d. | sell part of the
timber in 1987 and part in 1988 | | | | |
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| 28. | All
of the following are examples of items resulting in variable costs except: a. | seeds | c. | depreciation. | b. | fertilizer. | d. | chemicals. | | | | |
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| 29. | All
of the following are said to be elastic with regard to demand except: a. | poultry | c. | wheat. | b. | salt | d. | pork. | | | | |
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| 30. | An
increase in the price of beef and pork will likely result in: a. | increased
consumption of beef and pork. | c. | increased
consumption of wheat | b. | increased consumption of
potatoes | d. | increased
consumption of poultry | | | | |
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| 31. | One
advantage in renting equipment is to: a. | increase investment credit. | c. | increase depreciation allowances. | b. | release capital
for other uses | d. | improve output
per worker. | | | | |
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| 32. | An
economic system in which the means of production are privately owned and controlled and which is
characterized by competition and the profit motive is called: a. | socialism | c. | communism. | b. | capitalism | d. | consumerism. | | | | |
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| 33. | The
total quantity of goods and services buyers are willing and able to buy at various prices at a given
time is called: a. | supply. | c. | a
deficit. | b. | demand. | d. | a default. | | | | |
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| 34. | A
plan for the use of money based on goals and expected income and expenditures is: a. | a supply and
demand curve | c. | a consumption
plan | b. | a
budget | d. | none of the
above. | | | | |
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| 35. | Charles found that he could reduce the fixed cost per bushel of wheat by increasing
his acreage. His fixed cost per bushel was $32 on a 10 acre operation, $16 on a 20 acre
operation, $8 on a 40 acre operation, $4 on an 80 acre operation, $2 on a 160 acre operation,
etc. Charles was experiencing: a. | declining balance financing. | c. | the exchange rate. | b. | the principle of
economy of scale. | d. | all the
above. | | | | |
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| 36. | Which
of the following is an advantage of increasing financial leverage? a. | It reduces the
owners risk. | c. | It's a way to
increase returns to equity capital. | b. | It's a way to insure that a family consumption needs are
met. | d. | It's a way to
reduce costs | | | | |
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| 37. | Lenders often require cash flow analyses to: a. | keep too many
farmers from getting loans. | c. | evaluate
repayment potential. | b. | harass the farmer. | d. | stall the farmer until the bank has the needed
cash. | | | | |
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| 38. | Which
of the following would a producer be most likely to use to determine the potential effects on profits
of changing the mix of crops grown on the farm? a. | income statement | c. | partial budget | b. | cash flow
statement | d. | balance
sheet | | | | |
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| 39. | As an
individual ages, the cost of a term life insurance policy would be likely to : a. |
increase | c. | change only
slightly | b. | decrease. | d. | Fluctuate depending on economic
conditions | | | | |
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| 40. | One
often hears that "farmers just can't find anyone to work on farms anymore." What does
this indicate? a. | people are
getting too soft to do physical labor | c. | farm wages are low compared with other
alternatives | b. | everybody is moving to town | d. | people don't like country living | | | | |
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| 41. | Which
is an advantage of land ownership over land leasing? a. | Greater
potential for equity accumulation. | c. | Farm size can be varied easily. | b. | Financial
obligations are more flexible | d. | More capital is
available for other aspects of the business. | | | | |
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| 42. | Which
of the following is a method of risk management for agricultural
producers?
A. marketing all crops on a cash
basis
B.
specialization
C.
diversification
D. borrowing heavily a. | marketing all
crops on a cash basis | c. | diversification | b. | specialization | d. | borrowing heavily | | | | |
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| 43. | The
"gross sales" of an operation is defined as: a. | total sales
minus expenses | c. | total sales
before fixed costs are subtracted. | b. | total sales minus fixed costs | d. | total sales before any expenses are
subtracted. | | | | |
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| 44. | Cotton farmers in the early 1900's were devastated by the boll weevil. This is
an example of the higher risk involved with ________. a. | specialization | c. | cotton | b. | diversification | d. | insect prone crops | | | | |
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| 45. | Why
do farmers generally have no control over prices? a. | there are many sellers competing in the market relative to the
number of buyers | c. | middlemen set
prices
| b. | futures market speculators set
prices | d. | the Federal
Price Stabilization Board sets prices | | | | |
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| 46. | Which
of the following items will increase the net worth of a farmer? a. | a loan used to
finance the purchase of a new machine | c. | the sale of breeding livestock | b. | the sale of
stored grain | d. | none of the
above | | | | |
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| 47. | You
put a $200 steer on feed at a cost of 35 cents per day. The animal gains one pound per
day. If the price of cattle drops to 33 cents per pound and is expected to remain there, what
should you do? a. | sell the animal
immediately | c. | shoot the animal
to raise prices | b. | feed him out | d. | reduce the amount of feed fed. | | | | |
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| 48. | Assume that the government passes a law forbidding banks to foreclose on financially
stressed farms to recover their loans. A likely effect of this law would be to cause interest
rates charged to all farmers to: a. | decline. | c. | increase | b. | remain the
same. | d. | increase at
first but then go down. | | | | |
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| 49. | Why
is automobile insurance more expensive for the 16-19 year old group than for the 26-29 year old
group? a. | young people are
being discriminated against | c. | young people
tend to have more accidents | b. | young people have more money to spend than
adults | d. | young people
drive more miles than adults | | | | |
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| 50. | Vern
and Lewis borrowed $10,000 together to buy a truck and start a hay hauling business. After
three months, they were three months overdue with payments and the banker wanted his money.
Lewis left town with the truck and gave no forwarding address. Vern decided to quit the
business and realized he had lost his half of the truck. He went to the bank to pay his half of
the money for the truck. The banker said: a. | that will be $5,000 | c. | that will be $10,000 | b. | maybe Lewis will
come back -- let's wait a while | d. | I can't collect
from you till we hear from your partner | | | | |
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Data
for questions 51 - 60.
Mr. Byars
is examining the financial performance of his farming operation. He has assembled the following
data.
Checking account balance
$10300
Savings account
balance
$11200
Supplies on hand
$1500
Feed on hand
$2500
Breedi ng herd
$62000
Equipment
$25000
Land and buildings
$24000
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| 51. | What
is the total value of the fixed assets for Mr. Byars' operation? a. | $137,500 | c. | $24,000 | b. | $113,500 | d. | $49,000 | | | | |
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| 52. | What
is the total value of the intermediate assets? a. | $87,000 | c. | $111,000 | b. | $113,000 | d. | $49,000 | | | | |
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| 53. | What
is the total value of the current assets? a. | $25,000 | c. | $22,500 | b. | $24,000 | d. | $49,000 | | | | |
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| 54. | Mr. Byars' total assets amount to: a. | $136,000 | c. | $24,000 | b. | $113,500 | d. | $49,000 | | | | |
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| 55. | (55)
Liabilities (payments due in the next 12 months)
Feed
Bill
3500
Land and equipment payments
15000
What term best describes and is most often used to
name the liabilities listed at the blank labeled "55" above? a. | Recent
| c. | Due | b. | Current | d. | Projected | | | | |
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| 56. | (56)
Liabilities
(payments due from 2 - 10 years)
Machinery
laon
23000
Feed lot equipment
loan
9000
What term best describes and is most often used to name the
liabilities listed at the blank labeled "56" above? a. | Recent
| c. | Intermediate | b. | Current | d. | Projected | | | | |
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| 57. | (57)
Liabilities
Mortgage on
farm
30000
What term best describes and is most often used to
name the liabilities listed at the blank labeled "57" above? a. | Long
term | c. | Capital | b. | Intermediate | d. | Major | | | | |
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| 58. | What
is the total of Mr. Byars' liabilities? a. | $80,500 | c. | $77,000 | b. | $69,000 | d. | $89,000 | | | | |
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| 59. | Mr. Byars' business is: a. | current | c. | insolvent | b. | intermediate | d. | solvent | | | | |
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| 60. | What
is Mr. Byars' net worth? a. | $136,500 | c. | $80,500 | b. | $71,461 | d. | $56,000 | | | | |
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| 61. | AAA
Farm Services charges $20 per man-hour for labor to install irrigation equipment. What would be
the total labor chrage for a job if a crew of three men work from 8:00 am until 12:00 noon on a
certain job? a. | $1000 | c. | $80 | b. | $1080 | d. | $240 | | | | |
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Data
for questions 62 - 67.
Ann has
determinded that her cost for producing field grown shade trees is $30 each. She has a two acre
field of trees spaced 8 X 10 feet apart. She has been offered $36 each for the trees with the
buyer harvesting and removing the trees by March. Another buyer has offered to pay her $40 for
the trees if she will deliver them to his retail nursery. Ann has estimated her harvesting and
delivery costs as follows:
Cost of a rental
truck (returned to rental site)
$.60 per mile
Cost of
gas
$.15 per mile
Cost of digging
and burlapping
$2178
Milage to costumer's nursery
100 miles
Labor for
delivery
$100
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| 62. | What
will be er net return if she sells the trees in the field for $36 each? a. | $6366 | c. | $6534 | b. | $3291 | d. | $3262 | | | | |
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| 63. | What
will be her added cost to dig, package, and deliver the trees to the nursery
indicated? a. | $2428 | c. | $3233 | b. | $2178 | d. | $3987 | | | | |
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| 64. | What
will be her net return if she seels the trees delivered to her costumer's nursery? a. | $6534 | c. | $8462 | b. | $7271 | d. | $18,534 | | | | |
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| 65. | How
much would she gain by selling the trees delivered instead of in the field? a. | $1047 | c. | $1928 | b. | $1325 | d. | $2428 | | | | |
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| 66. | How
much does it cost to dig, package, and deliver each tree? a. | $4.46 | c. | $0.87 | b. | $1.95 | d. | $2.23 | | | | |
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| 67. | Ann
would really like to sell the trees in the field so that she can devote her time and resources to
other parts of the business, but she knows that they should bring $37 each instead of the $36 offered
her. She thinks she can find a buyer at $37 if she advertises in the Nurseryman's magazine but
the ad will cost $250. What will be the difference in the net return between selling at $36
without the ad and at $37 with the cost of the ad accounted for?
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Data
for questions 68 - 72.
Partial
Budgeting:
Doug is considering raising soybeans instead of
corn. Given the following information, help him make the correct
decision.
-100 acres to be planted
- projected corn
income (gross) = $300 per acre
- projected soybean income (gross) =$280 per
acre
- cost of fertilizer is $40 less per acre for soybeans
- cost of fuel
is $20 less per acre for soybeans
- chemical cost is $25 more per acre for
soybeans
Additional costs
Additional returns
Reduced Returns
Reduced
Cost
Total reduced income = additional costs and
reduced returns
Total added income = additional returns and reduced
costs
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| 68. | What
would be the net change in income for Doug if he grew soybeans instead of corn? a. | +$8379 | c. | +$373 | b. | +$1500 | d. | -$5859 | | | | |
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| 69. | What
will be Doug's gross returns with the proposed change? a. | $8379 | c. | $28,000 | b. | $5859 | d. | $22,050 | | | | |
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| 70. | The
income from soybeans reflects a projected yield of 50 bushels per acre. What is the projected
price per bushel? a. | $3.62 | c. | $3.20 | b. | $5.60 | d. | $8.67 | | | | |
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| 71. | What
would be the net change in profit if the beans sell for 2 cents more per bushel? a. | $122 | c. | $100 | b. | $10 | d. | $12.20 | | | | |
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| 72. | What
is the additional fixed cost (total) for the proposed change? a. | $0 | c. | $750 | b. | $2659.50 | d. | $1395 | | | | |
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Data
for questions 73 and 74:
Weight
Price per
Marginal Total
Marginal
per
hog 100
lbs. cost
return
return
190
$45.00
200
$45.00
210
$44.75
220
$43.75
Notes - 3 pounds of feed is required for a pound of
gain.
feed costs $0.12 per
pound
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| 73. | Based
on the data provided, at what weight should Dave sell his hogs? a. | 190
pounds | c. | 210
pounds | b. | 200 pounds | d. | 220 pounds | | | | |
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| 74. | What
would be Dave's profit on 500 head if his total cost is $0.41 per pound and he sells at the 190 pound
weight a. | $4,500 | c. | $3,800 | b. | $450 | d. | $380 | | | | |
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Cash flow projection for Paul's pig plantation, 1988
Cash inflow
Jan-Mar
Ap-June July-Sept
Oct-Dec
Sale of
pigs 0
3000
0 3000
Cash outflow
Feed
1000
500
1000 500
Hired labor
300
300 300
300
Fixed
cost 100
100
100 100
Supplies
50
50 50
50
Total cash
outflow
1450 950
1450
950
Cash surplus/Deficit
-1450
600 -850
Operating Loan
Bal. 1450
0
850
($0.00 1/1/88)
Ending cash
balance
0 600
0
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| 75. | What
will be the ending cash balance for the farm in December, 1988? a. | $950 | c. | $1200 | b. | $$1450 | d. | $1500 | | | | |
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