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Answer

a

Net Change in Profit=Ksh −27370\text{Net Change in Profit} = \text{Ksh } -27370

Step-by-step solution

5 steps

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Part a· 5 steps

Prepare a Partial Budget and Show the Effect of the Change

  1. Calculate Added Returns from Potatoes.

    This is the revenue Mr. Onyango will gain by planting potatoes on 0.3 ha0.3 \text{ ha}.

    • Potato yield per hectare: 90 bags90 \text{ bags}
    • Potato yield for 0.3 ha0.3 \text{ ha}: 90 bags/ha×0.3 ha=27 bags90 \text{ bags/ha} \times 0.3 \text{ ha} = 27 \text{ bags}
    • Price of potatoes per bag: Ksh 300
    Added Returns=27 bags×Ksh 300/bag=Ksh 8100\text{Added Returns} = 27 \text{ bags} \times \text{Ksh } 300/\text{bag} = \text{Ksh } 8100
  2. Calculate Reduced Costs from not planting Maize.

    These are the costs Mr. Onyango will save by not planting maize on 0.3 ha0.3 \text{ ha}.

    • Maize Fertilizer:
      • Maize fertilizer rate: 2 bags/ha2 \text{ bags/ha}
      • Maize fertilizer for 0.3 ha0.3 \text{ ha}: 2 bags/ha×0.3 ha=0.6 bags2 \text{ bags/ha} \times 0.3 \text{ ha} = 0.6 \text{ bags}
      • Cost of fertilizer (50kg): Ksh 1400
      Reduced Fertilizer Cost=0.6 bags×Ksh 1400/bag=Ksh 840\text{Reduced Fertilizer Cost} = 0.6 \text{ bags} \times \text{Ksh } 1400/\text{bag} = \text{Ksh } 840
    • Maize Seeds:
      • Maize seeds needed for 0.3 ha0.3 \text{ ha}: 1 bag1 \text{ bag}
      • Cost of maize seeds (50kg): Ksh 200
      Reduced Seed Cost=1 bag×Ksh 200/bag=Ksh 200\text{Reduced Seed Cost} = 1 \text{ bag} \times \text{Ksh } 200/\text{bag} = \text{Ksh } 200
    Total Reduced Costs=Ksh 840+Ksh 200=Ksh 1040\text{Total Reduced Costs} = \text{Ksh } 840 + \text{Ksh } 200 = \text{Ksh } 1040
  3. Calculate Added Costs for planting Potatoes.

    These are the new costs Mr. Onyango will incur for planting potatoes.

    • Potato Fertilizer:
      • Potato fertilizer rate: 2.5 bags/ha2.5 \text{ bags/ha}
      • Potato fertilizer for 0.3 ha0.3 \text{ ha}: 2.5 bags/ha×0.3 ha=0.75 bags2.5 \text{ bags/ha} \times 0.3 \text{ ha} = 0.75 \text{ bags}
      • Cost of fertilizer (50kg): Ksh 1400
      Added Fertilizer Cost=0.75 bags×Ksh 1400/bag=Ksh 1050\text{Added Fertilizer Cost} = 0.75 \text{ bags} \times \text{Ksh } 1400/\text{bag} = \text{Ksh } 1050
    • Potato Seeds:
      • Potato seeds needed for 0.3 ha0.3 \text{ ha}: 10 bags10 \text{ bags} (of 10kg)
      • Cost of potato seeds per bag (10kg): Ksh 1350
      Added Seed Cost=10 bags×Ksh 1350/bag=Ksh 13500\text{Added Seed Cost} = 10 \text{ bags} \times \text{Ksh } 1350/\text{bag} = \text{Ksh } 13500
    • Extra Labour:
      • Extra labour days per hectare: 40 days/ha40 \text{ days/ha}
      • Extra labour days for 0.3 ha0.3 \text{ ha}: 40 days/ha×0.3 ha=12 days40 \text{ days/ha} \times 0.3 \text{ ha} = 12 \text{ days}
      • Cost of labour per day: Ksh 150
      Added Labour Cost=12 days×Ksh 150/day=Ksh 1800\text{Added Labour Cost} = 12 \text{ days} \times \text{Ksh } 150/\text{day} = \text{Ksh } 1800
    Total Added Costs=Ksh 1050+Ksh 13500+Ksh 1800=Ksh 16350\text{Total Added Costs} = \text{Ksh } 1050 + \text{Ksh } 13500 + \text{Ksh } 1800 = \text{Ksh } 16350
  4. Calculate Reduced Returns from not planting Maize.

    This is the revenue Mr. Onyango will lose by not planting maize.

    • Maize yield per hectare: 56 bags56 \text{ bags}
    • Maize yield for 0.3 ha0.3 \text{ ha}: 56 bags/ha×0.3 ha=16.8 bags56 \text{ bags/ha} \times 0.3 \text{ ha} = 16.8 \text{ bags}
    • Price of maize per bag: Ksh 1200
    Reduced Returns=16.8 bags×Ksh 1200/bag=Ksh 20160\text{Reduced Returns} = 16.8 \text{ bags} \times \text{Ksh } 1200/\text{bag} = \text{Ksh } 20160
  5. Construct the Partial Budget and Calculate the Net Change in Profit.

    Partial Budget for Changing 0.3 ha of Maize to Potatoes

    ItemAmount (Ksh)
    A. Added Returns
    Returns from Potatoes (0.3 ha)8100
    Total Added Returns8100
    B. Reduced Costs
    Maize Fertilizer Saved (0.3 ha)840
    Maize Seeds Saved (0.3 ha)200
    Total Reduced Costs1040
    C. Added Costs
    Potato Fertilizer (0.3 ha)1050
    Potato Seeds (0.3 ha)13500
    Extra Labour (0.3 ha)1800
    Total Added Costs16350
    D. Reduced Returns
    Lost Returns from Maize (0.3 ha)20160
    Total Reduced Returns20160
    Net Change in Profit (A+B)-(C+D)-27370

    The effect of the change is a decrease in profit of Ksh 27,370.

    Net Change in Profit=Ksh −27370\boxed{\text{Net Change in Profit} = \text{Ksh } -27370}

Part b

Advice to the Farmer

Based on the partial budget analysis, switching 0.3 ha0.3 \text{ ha} from maize to potatoes would result in a significant loss of Ksh 27,370. Therefore, the advice to Mr. Onyango is not to make this change as it is not economically viable.

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