Calculate the gross margin for each crop. From your calculation which crop is profitable to grow. Discuss…

Question

Calculate the gross margin for each crop. From your calculation which crop is profitable to grow. Discuss five factors considered when planning a farm

ScanSolve AI Tutor · Accepted Answer

Here are the calculations for the gross margin of each crop and the discussion of factors for farm planning.

i) Calculate the gross margin for each crop

The gross margin is calculated as:

\text{Gross Margin} = \text{Total Revenue} - \text{Total Variable Costs}

All calculations are per hectare.

For Maize:

Calculate Total Revenue for Maize.
$\text{Total Revenue} = \text{Yield per hectare} \times \text{Price per kg}$ $\text{Total Revenue} = 5500 \text{ kg} \times 15 \text{ Kshs/kg} = 82500 \text{ Kshs}$
Calculate Total Variable Costs for Maize.
- Cost of cultivation/ha: $3000 \text{ Kshs}$
- DAP fertilizer cost: $3 \text{ bags} \times 1500 \text{ Kshs/bag} = 4500 \text{ Kshs}$
- Labour cost: $50 \text{ man days} \times 150 \text{ Kshs/man day} = 7500 \text{ Kshs}$
- CAN fertilizer cost: $3 \text{ bags} \times 1000 \text{ Kshs/bag} = 3000 \text{ Kshs}$
$\text{Total Variable Costs (Maize)} = 3000 + 4500 + 7500 + 3000 = 18000 \text{ Kshs}$
Calculate Gross Margin for Maize.
$\text{Gross Margin (Maize)} = 82500 \text{ Kshs} - 18000 \text{ Kshs} = \boxed{\text{64500 Kshs}}$
For Beans:

Assumption: For Beans, "Yield per hectare Kshs.5000" is interpreted as 5000 kg, consistent with the maize data format.
Calculate Total Revenue for Beans.
$\text{Total Revenue} = \text{Yield per hectare} \times \text{Price per kg}$ $\text{Total Revenue} = 5000 \text{ kg} \times 50 \text{ Kshs/kg} = 250000 \text{ Kshs}$
Calculate Total Variable Costs for Beans.
- Cost of cultivation/ha: $3600 \text{ Kshs}$
- Labour cost: $75 \text{ man-days} \times 200 \text{ Kshs/man day} = 15000 \text{ Kshs}$
- DAP fertilizer cost: $2 \text{ bags} \times 1500 \text{ Kshs/bag} = 3000 \text{ Kshs}$
- Seed cost: $20 \text{ kg} \times 80 \text{ Kshs/kg} = 1600 \text{ Kshs}$
- CAN fertilizer cost: $1 \text{ bag} \times 1000 \text{ Kshs/bag} = 1000 \text{ Kshs}$
- Cost of sprays: $3000 \text{ Kshs}$
$\text{Total Variable Costs (Beans)} = 3600 + 15000 + 3000 + 1600 + 1000 + 3000 = 27200 \text{ Kshs}$
Calculate Gross Margin for Beans.
$\text{Gross Margin (Beans)} = 250000 \text{ Kshs} - 27200 \text{ Kshs} = \boxed{\text{222800 Kshs}}$
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Calculate the gross margin for each crop. From your calculation which crop is profitable to grow. Discuss five factors considered when planning a farm

Step-by-step solution

Calculate Total Revenue for Maize.

Calculate Total Variable Costs for Maize.

Calculate Gross Margin for Maize.

Calculate Total Revenue for Beans.

Calculate Total Variable Costs for Beans.

Calculate Gross Margin for Beans.

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