Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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| 1. | If someone
owes your business money, you would consider this: a. | accounts
receivable. | c. | marginal
costs. | b. | accounts payable. | d. | liabilities. | | | | |
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| 2. | If the use
of a tractor is decreased from 750 to 500 acres per year it's: a. | total variable costs
will increase. | c. | total fixed cost will
increase. | b. | variable costs per acre will rise. | d. | average fixed cost per acre will increase. | | | | |
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| 3. | The book
value of a piece of equipment would be the: a. | value that the item currently has on the open
market. | b. | cost of an item plus the total depreciation to
date. | c. | cost of the item minus any adjustments such as prior
depreciation. | d. | sentimental value of the item to the
producer. | | |
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| 4. | The property
and other resources owned and controlled by a business are: a. | capital. | c. | equity. | b. | assets. | d. | estate. | | | | |
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| 5. | Speculators
in the futures market: a. | usually make a small profit on every deal. | b. | are the same as
hedgers. | c. | do not produce any of the products they buy and
sell. | d. | always take the short position. | | |
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| 6. | Signing a
contract to produce a product at a set price is done to: a. | reduce the risk
of unfavorable price fluctuations. | b. | make sure there is a market for the product. | c. | reduce capital
investment. | d. | increase the chance of high gross return | | |
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| 7. | The size of
farms in the United States is: a. | increasing. | c. | remaining stable. | b. | decreasing. | d. | not
known. | | | | |
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| 8. | Examples of
fixed costs are: a. | fertilizer, seed, and
fuel. | c. | feed, medicine, and
electricity. | b. | rent, taxes, and insurance. | d. | labor, fertilizer, and fuel. | | | | |
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| 9. | The first
step in making a sound management decision is to: a. | gather information. | c. | define the problem. | b. | evaluate
solutions. | d. | take
action. | | | | |
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| 10. | An advantage
of the cash method of reporting income and expenses is: a. | expenses are not
deductible until cash is paid. | b. | income is erratic. | c. | it is easier to analyze
the strong and weak points of the farm from year to year. | d. | more flexibility to
choose when to take income and deduct expenses. | | |
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| 11. | Suppose
farmer Johnson buys a new cotton picker for $160,000. It has a useful life of six years and a
salvage value of $40,000. What is the annual depreciation using the straight-line
method? a. | $20,000 | c. | $12,000 | b. | $16,000 | d. | $22,000 | | | | |
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| 12. | Returns to
unpaid operator and family labor, equity capital, and management is: a. | net
worth. | c. | net farm
income. | b. | owner's equity. | d. | capital gains. | | | | |
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| 13. | Which of the
following is NOT a variable cost? a. | livestock feed | c. | fuel | b. | depreciation | d. | seed | | | | |
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| 14. | A business
that is owned and controlled by one person is a: a. | corporation. | c. | sole proprietorship. | b. | limited
corporation. | d. | partnership | | | | |
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| 15. | The ability
of a business to pay off liabilities without disrupting business is termed: a. | solidity. | c. | feasibility. | b. | liquidity. | d. | elasticity | | | | |
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| 16. | An agreement
to buy and receive or to sell and deliver a commodity at an upcoming date with certain specified
characteristics is a: a. | hedge. | c. | futures contract. | b. | option. | d. | put. | | | | |
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| 17. | If demand
for a product goes down and all other factors remain the same, then the price of that product will
probably: a. | decrease. | c. | remain the
same. | b. | increase. | d. | can't tell from the information given. | | | | |
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| 18. | If the price
of a product increases and the demand does not change, the demand for the product is said to
be: a. | inelastic. | c. | unitarily
elastic. | b. | elastic. | d. | solely elastic | | | | |
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| 19. | Suppose John
Brown has 100 acres of cropland. He wants to plant it in corn and soybeans. To decide
what ratio of corn and beans will give him the most returns he should use a: a. | income
statement. | c. | partial
budget. | b. | cash flow statement. | d. | balance sheet. | | | | |
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| 20. | An advantage
of a farm corporation is that: a. | it is less complicated and easy to
organize. | c. | corporations cannot be
sued. | b. | it limits liability of the owners. | d. | it is easier for corporations to get credit | | | | |
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| 21. | An estimate
of monthly cash inflows and outflows over a year, is a: a. | cash on-hand
summary. | c. | whole farm
budget. | b. | cash accounting method. | d. | cash flow projection. | | | | |
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| 22. | Speculators
and hedgers: a. | make their deals
through local banks. | c. | make deals through
certificates of deposit. | b. | make trades in stocks and bonds. | d. | deal in the futures market. | | | | |
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| 23. | Total cost
of producing a product equals: a. | fixed costs + variable costs | c. | fixed costs X variable costs | b. | fixed costs - variable
costs | d. | (fixed costs + variable
costs) X depreciation | | | | |
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| 24. | A market
where there is a true interaction of supply and demand, and where government interference does not
exist is an example of: a. | monopolistic competition. | c. | socialism. | b. | a free market. | d. | capitalism. | | | | |
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| 25. | If one of
the major soybean producing countries other than the U.S. has a drought this year and soybean
production is drastically reduced, what effect if any, will this probably have on the price of
soybeans in Georgia? a. | prices will decline. | b. | it will not effect our
prices. | c. | prices will go up. | d. | prices will go very low
then increase to the original price. | | |
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| 26. | A market in
which there are a few producers of very similar products, such as automotive manufacturers, is an
example of which of the following? a. | Oligopoly | c. | Perfect competition | b. | Monopoly | d. | none of the
above | | | | |
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| 27. | Which of the
following is NOT an advantage of a cash flow projection? a. | It helps you determine
when a loan will need to be taken out. | b. | It shows the operator when excess cash will be
available. | c. | It helps you determine when you can pay off
debt. | d. | It sets prices you will receive in the
future. | | |
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| 28. | In the long
run: a. | all things are
variable. | c. | some things are fixed
and some are variable. | b. | all things are fixed. | d. | only land is fixed. | | | | |
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| 29. | If Mary
Jones's corn yield doubles, her: a. | break-even price will increase. | c. | break-even price will remain the same. | b. | break-even price will
decrease. | d. | none of the
above. | | | | |
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| 30. | If a
farmer's equity is $400,000 and his liabilities are $250,000 his debt-equity ratio (liability/equity)
is:
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| 31. | A farmer is
contemplating buying a combine instead of having his wheat custom harvested. In his partial
budget, if additional costs and reduced returns are greater than additional returns and reduced costs
he should: a. | buy the
combine. | c. | do either because net
income will not change. | b. | not buy the combine. | d. | buy two combines and do custom harvesting. | | | | |
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| 32. | A statement
of expected returns and costs that are associated with the production of one product is
a(n): a. | enterprise
budget. | c. | farm
budget. | b. | whole farm budget. | d. | operating budget. | | | | |
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| 33. | Total assets
minus total liabilities equals: a. | net profit. | c. | net worth. | b. | capital gain. | d. | gross sales | | | | |
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| 34. | Which of the
following is deductible on farm income taxes? a. | the cost of a badly needed vacation | c. | principal payments on a home | b. | payments for a pleasure
horse | d. | livestock feed
costs | | | | |
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| 35. | John Henry
made $75,345 profit on his farrow-to-finish operation. His capital investment was
$670,450. What was his rate of return to capital invested?
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| 36. | Long term
assets include: a. | trucks | c. | breeding
livestock | b. | buildings | d. | stored grains | | | | |
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| 37. | The owner of
a side of a stream or riverbank is called a: a. | riparian. | c. | river rights steward. | b. | water rights
activist. | d. | personal property
steward. | | | | |
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| 38. | Kelly
borrowed $1000 from the bank at 8% interest. She is to make a lump-sum payment at the end of
the year. If simple interest is used, what is the total amount she will pay? a. | $1148 | c. | $1180 | b. | $1120 | d. | $1080 | | | | |
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| 39. | A farm or
ranch is termed solvent if which of the following apply? a. | Total liabilities are
larger than total assets. | b. | Total assets times 2 is larger than total
liabilities. | c. | Total assets are equal to or greater than total
liabilities. | d. | Total assets times total liabilities is greater than
1. | | |
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| 40. | Jeff plants
corn this year on 98 acres. It costs him $138.00 per acre to grow the corn. If corn
brings $2.47 per bushel, how many bushels does he have to produce to break even? a. | 98
bu./acre. | c. | 110
bu./acre. | b. | 85 bu./acre. | d. | 56 bu./acre. | | | | |
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| 41. | If you get
$0.20 per bushel above the break even price, what will be your profit on 15,000
bushels? a. | $300 | c. | $30,000 | b. | $3,000 | d. | $1,500 | | | | |
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| 42. | A written
statement that shows the exact size, location, ownership and method of ownership of property is
called a: a. | trust. | c. | contract. | b. | deed. | d. | inferred contract. | | | | |
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| 43. | Marvin
raises purebred Simmental cattle. The money he spends on hay and feed would be termed
a: a. | fixed
cost. | c. | marginal
cost. | b. | variable cost. | d. | feasible cost. | | | | |
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| 44. | Lynn has
hedged his soybeans based on predicted production of 50 bushels per acre. He also contracted to
purchase all his materials, supplies, and other inputs at a good price to produce the crop. Under
which of the following conditions would Lynn be in trouble? a. | He makes 60 bushels to
the acre. | b. | The market price at harvest time is half of what he hedged the beans
for and he makes 45 bushels per acre. | c. | The market price at harvest time is half of what he hedged the beans
for and he makes 25 bushes per acre. | d. | The market price at harvest time is double what he hedged the beans
for and he makes 30 bushels per acre. | | |
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| 45. | The balance
sheet of a farm should include: a. | value of livestock. | c. | current liabilities. | b. | amount in savings
account. | d. | all of the
above. | | | | |
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| 46. | As a farm
manager you want to find your net capital ratio (total assets / total liabilities). You have
current liabilities of $58,000 and long term liabilities of $82,000. Your assets equal
$210,000. Your net capital ratio would be:
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| 47. | Which of the
following is NOT a futures trading term?
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| 48. | If the U.S.
government granted you exclusive rights to produce Vidalia onions, that would be
a(n): a. | cooperative
market. | c. | oligopoly. | b. | free market. | d. | monopoly. | | | | |
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| 49. | In general,
it can be said that when beef prices are low that: a. | beef supplies are
low. | b. | beef supplies are
high. | c. | demand for beef is high. | d. | none of the above
because supply does not affect price | | |
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| 50. | A nonprofit
business organization that is owned and controlled by the members for the mutual benefit of the
members is a: a. | corporation. | c. | cooperative. | b. | oligopoly. | d. | firm. | | | | |
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The data in
the following table applies to questions 51-53.
Equal Monthly Payments
to Amortize a Loan of $1000
|
Interest Rate |
10
Years |
15
Years |
20
Years |
30
Years |
7
3/4 |
9.61 |
9.41 |
8.21 |
7.16 |
8 |
9.76 |
9.96 |
8.36 |
7.34 |
8 1/4 |
9.9 |
9.7 |
8.52 |
7.51 | | | | | |
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| 51. | How much
will the monthly payment be on a piece of property with $36,000 financed at 8% and amortized over 30
years? a. | $843.76 | c. | $638.58 | b. | $723.14 | d. | $264.24 | | | | |
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| 52. | If you
finance this loan over 30 years, which of the following would be INCORRECT? a. | more interest would be
paid in year 1 than in year 30 | b. | the total payment would remain constant for 30
years | c. | more principal would be paid in year 30 than in year
1 | d. | interest is always 50%
of the payment and principal is always 50% of the payment | | |
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| 53. | The person
creating the table made a mistake in one of the cells for 8% -- all others are correct. Which
one is INCORRECT? a. | 8% for 10
years | c. | 8% for 20
years | b. | 8% for 15 years | d. | 8% for 30 years | | | | |
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| 54. | Amy has
8,000 ten-inch hanging baskets to fill with soil. How much will her per-unit cost of soil be if each
bag of soil costs $18 and each bag will fill 62 ten-inch baskets? a. | $0.29 | c. | $0.27 | b. | $0.16 | d. | $0.53 | | | | |
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| 55. | How much
will the total soil cost for Amy's 8000 hanging baskets be? a. | $2320 | c. | $2160 | b. | $1280 | d. | $4240 | | | | |
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Income
Statement Analysis, Use the following information to answer questions 56 -
58.
Soybean
sales
$44,000
Sale of
hay
23,500
Building
depreciation
7,800
Increase in inventory of
livestock
77,000
Feeder calf sales
22,000
Total cash operating expenses
42,000
Machinery depreciation
10,000
Decrease in crop inventory
24,000
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| 56. | What is the
gross cash farm income for this business? a. | $59,500 | c. | $135,500 | b. | $89,500 | d. | $139,500 | | | | |
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| 57. | What is the
net farm income for this business? a. | $69,300 | c. | $61,700 | b. | $40,700 | d. | $82,700 | | | | |
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| 58. | What is the
net cash farm income for this business? a. | $11,700 | c. | $47,500 | b. | $27,500 | d. | $89,500 | | | | |
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Problems
59 - 60. Help Courtney decide how she should market her hogs, given the following
information.
- she has 200 hogs weighing 240 pounds
each
- she can
get:
47 cents per pound at the local market in
Macon
49 cents per pound at Thomasville
48 cents per pound at Cordele
50 cents per pound at
Baxley
- it will cost her:
$100 to deliver them to Macon
$200 to deliver them to Thomasville
$550 to deliver them to Baxley
$150 to deliver them to
Cordele
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| 59. | Courtney
should sell her hogs at: a. | Macon | c. | Baxley | b. | Thomasville | d. | Cordele | | | | |
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| 60. | Suppose her
break-even price is 44 cents per pound. What will her profit be if her selling price is 52
cents per pound? a. | $1696 | c. | $2329 | b. | $1786 | d. | $3840 | | | | |
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Partial
Budget: Items 61 - 66. Growing 1 gallon dogwoods vs. growing 1 gallon Japanese
maples.
A producer has room to grow 5000 one gallon plants. He is trying
to decide between growing dogwoods or Japanese maples. The following data will help you complete a
partial budget and answer the questions relating to this item.
He can sell one-gallon dogwoods for $1.75 each
He can sell one-gallon Japanese maples for $4.95 each
It takes 2 years to produce a one-gallon Japanese Maple
It takes 1 year to produce a one gallon dogwood
Fertilizer, labor, irrigation, pesticides and overhead costs $0.89 per one gallon pot
per year
If maples are grown, 5000 fewer pots with soil will be needed
over the two year period
One-gallon pots with
soil cost 24 cents each for either crop
Dogwood seedlings cost
$0.35 each
Japanese maple seedlings cost $1.35 each
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| 61. | What is the
gross value of the two dogwood crops he can grow in the two year period? a. | $3100 | c. | $13,950 | b. | $7,250 | d. | $17,500 | | | | |
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| 62. | What is the
total production cost of growing 5000 maples? a. | $17,450 | c. | $16,850 | b. | $12,340 | d. | $24,750 | | | | |
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| 63. | What is the
break-even price for dogwoods? a. | $0.89 | c. | $1.60 | b. | $1.48 | d. | $1.75 | | | | |
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| 64. | What is the
estimated TOTAL PROFIT OR LOSS to be made over the two year period if the grower decides to grow
dogwoods? a. | +
$2700 | c. | +
$7727 | b. | + $7727 | d. | - $5328 | | | | |
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| 65. | What is the
estimated TOTAL PROFIT OR LOSS to be made if the grower decides to grow maples? a. | -
$439 | c. | +
$8428 | b. | + $7900 | d. | + $5328 | | | | |
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| 66. | Since he can
only care for 5000 pots, what should this grower do? a. | grow one-gallon
dogwoods | b. | grow one-gallon maples | c. | grow 1/2 dogwoods and
1/2 maples | d. | find another crop; neither of these are
profitable | | |
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Cash
Flow Statements: Questions 67 - 71 refer to the itemized cash flow projection shown
below.
Cash Flow Summary |
Jan. |
Feb. |
Mar. |
April |
May |
June |
July |
Aug. |
Sept. |
Oct. |
Nov. |
Dec. |
Annual |
Beginning Cash Balance |
17373 |
12157 |
17618 |
40929 |
35208 |
28219 |
4410 |
7321 |
12648 |
37737 |
105356 |
85396 |
17373 |
Net Cash Income (income-exp.) |
20742 |
5461 |
23311 |
-5721 |
-6989 |
-23809 |
2911 |
5327 |
25089 |
67619 |
-19960 |
-22854 |
71127 |
Cash Position |
38115 |
17618 |
40929 |
35208 |
28219 |
4410 |
7321 |
12648 |
37737 |
105356 |
85396 |
|
88500 |
Money Borrowed |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Principal. Payment on Oper. Loan |
25000 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
25000 |
Interest Payment on Oper. Loan |
958 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
958 |
Ending Cash Balance |
12157 |
17618 |
40929 |
35208 |
28219 |
4410 |
7321 |
12648 |
37737 |
105356 |
85396 |
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| 67. | Which month
shows the lowest operating receipts? a. | March | c. | September | b. | June | d. | December | | | | |
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| 68. | If the
operating loan balance at the beginning of the year is $35,000, what is the balance at the end of the
year? a. | $17,373 | c. | $9,042 | b. | $10,000 | d. | $958 | | | | |
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| 69. | What is the
projected ending cash balance on December 31? a. | $616,689 | c. | $62,542 | b. | $614,289 | d. | $17,373 | | | | |
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| 70. | In what
month will additional money above the operating loan have to be borrowed? a. | March | c. | July | b. | September | d. | None | | | | |
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| 71. | If the
principal and interest payment in January completely paid off the operating loan, how much cash is
available at the end of the year? a. | $62,542 | c. | $71,127 | b. | $17,373 | d. | $108,250 | | | | |
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Enterprise Analysis: Questions 72-75 refer to the enterprise
analyses for peanuts shown below.
Peanut
Budget |
|
Per
Acre |
Per Acre |
Item |
Unit |
Amount |
Value |
Receipts |
|
|
|
Peanuts |
ton |
2.07 |
$1,118.52 |
Total
receipts |
|
|
$1,118.52 |
Expenses |
|
|
|
Seed |
lb |
125 |
$90.00 |
Fertilizer 3-18-9 |
cwt |
3 |
$21.15 |
Fertilizer 0-20-0 |
cwt |
4.75 |
$28.50 |
Pesticides: |
|
|
|
Temik |
lb |
8 |
$19.60 |
Dyfonate |
lb |
20 |
$17.60 |
Bravo |
gal |
1.13 |
$36.36 |
Sulfur |
gal |
1.00 |
$2.96 |
Balan |
gal |
1.00 |
$11.05 |
Vernam |
pt |
2.30 |
$6.85 |
Lasso |
qt |
3.00 |
$15.09 |
Lime |
ton |
.34 |
$7.14 |
Tractor use |
hr |
$4.15 |
$42.27 |
Machinery use |
hr |
$4.15 |
$32.74 |
Spraying |
hr |
$0.66 |
$14.71 |
Labor |
hr |
$4.81 |
$26.46 |
Irrigation |
appl |
5.00 |
$99.20 |
Cleaning & drying |
ton |
2.07 |
$45.57 |
Marketing cost |
ton |
2.07 |
$4.14 |
Interest on operating
capital |
dol |
$26.69 |
$26.69 |
Total
expenses |
|
|
$548.08 |
Returns to Land & Management |
|
|
$570.44 | | | | |
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| 72. | What was the
total peanut production if the producer planted 150 acres? a. | 1.63
tons | c. | 310.5
tons | b. | 244.5
tons | d. | 540.2
tons | | | | |
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| 73. | What price
per ton did the producer receive for the peanut crop? a. | $2.07 | c. | $540.35 | b. | $239.03 | d. | $1,118.52 | | | | |
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| 74. | If the
producer provided all of the labor (did not have to pay the labor expense) what would the return to
labor, land and management be? a. | $570.44 | c. | $543.98 | b. | $544.08 | d. | $596.90 | | | | |
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| 75. | What is the
break even price for his peanut crop? a. | $264.77 per ton | c. | $548.08 per ton | b. | $392.85 per
ton | d. | $640.34 per
ton | | | | |
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