2002 State Forest Business Management Practicum

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2002 State Forest Business Management Practicum

Read the following information before answeringthe questions below.

Logger Paul owns and operates his own loggingbusiness, complete with employees and equipment. He buys standingtimber from landowners. He cuts, hauls and sells his logs toHappywood Sawmill. Logger Paul's total expenses (excluding his cost of timber,but includingequipment depreciation, maintenance, fuel, labor, insurance,interest, taxes, etc.) amounts to $40.960 per month. Logger Paul'soperation works 22 days per month. Logger Paul is hoping to purchasea track-type feller-buncher for $156,000 (F.O.B. delivered price)after his next timber harvest. This feller-buncher's economic life isestimated as 6 years and its salvage value (or trade-in value) is$31,200.

Landowner Johnny owns 320 acres of timberland.Landowner Johnny wants to sell timber to a particular size, class,quality grade, and specie group that we will call 'Type Z' timber.Type Z timber on Landowner Johnny's property averages 5,200 boardfeet per acre and 250 board feet per tree.

Logger Paul is willing to pay Landowner Johnny$650 per MBF for all the Type Z timber that Landowner Johnny iswilling to sell. Happywood Sawmill buys Type Z logs delivered totheir yard for $850 per MBF.

Chose the BEST or CLOSEST answer!

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

1.

What is the ‘stumpage’ value per MBF for Type Z timber?

a.

$200

b.

$650

c.

$850

d.

Not enough information

2.

Using straight-line depreciation, what is Logger Paul’s annual depreciation charge for the track-type feller-buncher he hopes to purchase?

a.

$20,800

b.

$26,000

c.

$31,200

d.

Not enough information

3.

How many trees per day must be cut by Logger Paul if his production goal is 7.25 MBF per day?

a.

29

b.

34.5

c.

1812.5

d.

Not enough information

4.

If Landowner Johnny wants to gross at least 1/4-million dollars with his timber sale, at least how many acres of Type Z timber must he include in the sale?

a.

8

b.

57

c.

74

d.

241

5.

How many MBF per day will need to be harvested and delivered to the Happywood Sawmill for Logger Paul to make a profit of $4800 per month?

a.

2.4

b.

3.2

c.

8.2

d.

10.4