Name: 
 

2003 Ohio State Farm Business Management Problem Solving Test



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

 1. 

On Nov.1, I borrowed $30,000 to buy cattle in my feedlot. On May 1, I repaid the $30,000 plus $2,250 interest. What rate of interest did I pay?
a.
8.0%
b.
10.5%
c.
15.0%
d.
16.5%
 

 2. 

You purchased feeder pigs averaging 50 pounds and sold them as slaughter hogs at 200 pounds. Feed cost is $51 per hog. The feed cost per pound of gain was
a.
$0.25 cents
b.
$0.34 cents
c.
$0.37 cents
d.
$0.42 cents
 

 3. 

You provide land worth $135,000 and $12,000 cash. I put $50,000 worth of machinery, $15,000 in labor, and $47,000 cash. Based on our contributions, my share of $250,000 gross income is
a.
$112,000
b.
$135,000
c.
$90,000
d.
$125,000
 

 4. 

The nearby hog futures contract closed at $49.80 with a local basis of $1.85. The local cash market was
a.
$47.95
b.
$49.80
c.
$50.00
d.
$51.65
 

 5. 

What would be the net gain or loss of changing from a cash grain farm to a beef farm if crop receipts are down $9,000---crop costs are down $5,000---beef receipts are up $18.000 and beef costs are up $10,000?
a.
Gain $4,000
b.
Gain $16,000
c.
Gain $23,000
d.
Loss $18,000
 

 6. 

At harvest time a farmer has invested $40/acre for labor-seed-and machinery costs. What should he do if he expects a 20 bu/acre yield-a market price of $2/bu and it costs $14/acre to harvest the crop?
a.
Harvest and sell the crop
b.
Sell the oat crop as pasture for $5/acre
c.
Sell the oat crop for hay at $6/acre
d.
Assume his loss of $40/acre and leave the crop in the field
 

 7. 

A $50,000 loan is amortized at 8% for seven years and has annual payments of $9,604.30. How much of the first year’s payment is principal?
a.
$4,000.00
b.
$5,604.30
c.
$7,142.86
d.
$9,604.30
 

 8. 

A farmer has $100,000 in equipment used exclusively for wheat. The equipment will last five years and have a salvage value of $0. The farmer plants 1000 acres of wheat per year. If the interest rate is 8% on average annual investment, what will be the fixed costs per year (depreciation and average interest) for this machinery per acre of wheat?
a.
$16
b.
$20
c.
$24
d.
$28
 

 9. 

An investor uses a 10 percent discount rate in analyzing investments. A $10,000 return to be received in two years has a present value of:
a.
$8,100
b.
$8,264
c.
$11,000
d.
$12,100
 

 10. 

A farmer has $110 per acre invested in pre-harvest expenses in a soybean crop. Harvest costs are $48 per acre and the gross returns of the harvested crop would be $70 per acre. The farmer should:
a.
Abandon the crop because all variable costs are not covered
b.
harvest the crop and sell the crop for $70 per harvested acre
c.
rent the field to a neighbor for $20 per acre to pasture the crop
d.
abandon the crop because the farmer is going to lose money
 

 11. 

A farmer earned $10,000 from farming last year. The farming operation controls $150,000 of assets of which $50,000 are owed. What was the farmer’s rate of return on equity (ROE)?
a.
5%
b.
10%
c.
15%
d.
20%
 

 12. 

A feedlot operator purchased 100 feeder steers with an average weight of 700 pounds and sells them at an average weight of 1,050 pounds. The total feed cost is$21,000. Feed cost per pound of gain is:
a.
$0.20
b.
$0.30
c.
$0.60
d.
$0.70
 

 13. 

A farmer has total assets of $500,000 that include a market value of $300,000 on land. The farmer’s debt to asset ration is 1:1. The lender values the land at book value that is 10% less than market value. What is the farmer’s debt to asset ration at book value?
a.
0.94:1
b.
1.06:1
c.
1.11:1
d.
1.27:1
 

 14. 

A cattle feeding operation has sales of $60,000, feed purchases of $40,000, other costs of $10,000, beginning inventory of $40,000, and a closing inventory of $32,000. What is the net income from operations?
a.
$2,000
b.
$10,000
c.
$18,000
d.
$20,000
 

 15. 

A farmer rents an adjacent 150 acres for $45 per acre to operate with the current rented 500 acres using existing equipment. The effect on the farmer’s cost would be to:
a.
increase fixed costs per acre
c.
increase variable costs per acre
b.
decrease fixed costs per acre
d.
decrease variable costs per acre
 

 16. 

A tract of land is worth $20,000 today. If it increases by 5% every year, what will it be worth at the end of two years?
a.
$21,000
b.
$22,000
c.
$22,050
d.
$45,000
 

 17. 

A farmer has total assets valued at $785,791 of which machinery is valued at $217,221. His liabilities total $3`1,566. What will be the farmers debt to equity ratio if the lender devalues the machinery by 30%
a.
.57:1
b.
.61:1
c.
.77:1
d.
.87:1
 

 18. 

What is the break-even price per bushel if total variable costs are $83.25, total fixed costs are $15.73, and the crop yield is 42 bushels per acre?
a.
$0.37
b.
$1.61
c.
$1.98
d.
$2.36
 

 19. 

A farms wheat yield has averaged 35 bushels per acre while the sunflower yield has averaged 1500 pounds per acre. Production costs for wheat are $116.00 per acre and for sunflowers are $121.00 per acre. If the price for wheat is $3.65 per bushel what price per hundred weight for sunflowers would equal the net return for wheat?
a.
$7.73
b.
$8.07
c.
$8.85
d.
$9.10
 

 20. 

Corn has an expected yield of 125 bushels per acre and a production cost of $180.00 per acre. Expected market prices are $2.00 per bushel for corn and $5.25 per bushel for soybeans. Soybeans can be raised at a production cost of $110 per acre. At what breakeven yield per acre would soybeans generate the same net return per acre as corn?
a.
34.3 bushels
b.
36.4 bushels
c.
37.3 bushels
d.
40.2 bushels
 

 21. 

If high oil corn has the same production cost per acre as regular corn but can be sold for $0.20 per bushel more, what yield of high oil corn is needed to equal 130 bushels of regular corn at $2.25 per bushel
a.
109.7 bushels
b.
142.7 bushels
c.
117.5 bushels
d.
119.4 bushels
 

 22. 

If a 235 pound feeder pig is purchased for $31.50 per head and sold at 265 pounds of $45 per hundredweight, the breakeven cost of production per hundredweight of gain is _________.
a.
$30.50
b.
$33.11
c.
$38.15
d.
$51.85
 

 23. 

A feedlot operator buys feeder steers, finishes them and sells them. The operator estimates that finished steers will sell for $66 per hundredweight and that it will cost $185 per head to bring them from the 750 pound purchase weight to the 100 pound selling weight. What is the breakeven price the operator can pay for the 750 pound feeder steers per hundredweight?
a.
$72.13
b.
$73.85
c.
$88.00
d.
$96.80
 

 24. 

A farmer is purchasing a baler at a cost of $24,000. The dealer will finance the baler under the following terms. 20% down payment with the balance repaid in equal payments over the next five years at 9% APR (annual percentage rate). The farmer expects the baler to last for ten years and have a salvage value of $4,000. How much interest will the farmer pay the first year of the loan?
a.
$1,440
b.
$1,728
c.
$1,800
d.
$2,160
 

 25. 

At the beginning of last year, a farmer has an outstanding loan of $217,480. The interest rate was 10% APR (annual percentage rate). If the farmer made one loan payment at the end of the year of $35,000, what was the outstanding balance at the end of the year?
a.
$13,252
b.
$21,748
c.
$182,480
d.
$204,228
 

 26. 

On April 1, a producer secured an operating loan of $25,000. On November 1, the loan was repaid along with $1,239.58. What was the annual interest rate?
a.
4.9%
b.
8.5%
c.
9.8%
d.
14.5%
 

 27. 

A grain combine can be purchased for $90,000. Total annual fixed costs will be $12,000 and variable costs per acre will be $10/ If a custom operator can be hired to combine grain for $25 per acre, what is the minimum number of acres one should plan to harvest to justify buying the combine
a.
800 acres
b.
600 acres
c.
1,000 acres
d.
1,200 acres
 

 28. 

A farmer had a net farm income last year of $40,000. The farmer paid $10,000 for interest on borrowed capital during the year. Opportunity costs for unpaid family labor and management were $30,000. Equity in the business was $200,000. What was the percent return on equity?
a.
10%
b.
20%
c.
5%
d.
15%
 

 29. 

A farmer files a joint tax return. The farmer does not make estimates tax payments and off-farm income is less than 1/3 of total gross income. When must the 2004 tax return be filed with full payment of taxes due?
a.
January 31, 2004
c.
April 15, 2004
b.
March 1, 2004
d.
June 15, 2004
 

 30. 

A farmer borrowed $12,000 on March 1 to buy fertilizer for a sugarbeet crop. The farmer paid back the entire loan and 9% annual interest on December 1. What was the total amount of the principal and interest owed on December 1?
a.
$13,080
b.
$12,810
c.
$12,090
d.
$12,720
 

 31. 

A farmer purchased a 240 acre farm. The farm is entirely in pasture and hay. The farmer is trying to decide whether to continue to rent the farm to a neighbor who has been paying $4,800 per year pasture rent or to buy cattle and graze the land. There is enough pasture and hay to support a 60 cow herd.

A farmer can buy some good quality cows for $750 and bulls for $1,500 each, and borrow the money at the bank for 12% interest. What will be the annual capital cost for 60 cows and 2 herd bulls?
a.
$1,750
b.
$2,750
c.
$5,640
d.
$5,760
 

 32. 

A farmer purchased a 240 acre farm. The farm is entirely in pasture and hay. The farmer is trying to decide whether to continue to rent the farm to a neighbor who has been paying $4,800 per year pasture rent or to buy cattle and graze the land. There is enough pasture and hay to support a 60 cow herd.

The farmer will have the hay custom baled. There are 40 acres of alfalfa which averages 5 tons per acre. The farmer can get it baled and put in the barn for $40 per ton. What will the hay cost be?
a.
$1,600
b.
$3,200
c.
$4,000
d.
$8,000
 

 33. 

A farmer purchased a 240 acre farm. The farm is entirely in pasture and hay. The farmer is trying to decide whether to continue to rent the farm to a neighbor who has been paying $4,800 per year pasture rent or to buy cattle and graze the land. There is enough pasture and hay to support a 60 cow herd.

The farmer figures it will require 10 hours per week to take care of the cows. The value of labor is $5 per hour. What will be the annual charge for labor?
a.
$50
b.
$480
c.
$2,400
d.
$2,600
 

 34. 

A farmer purchased a 240 acre farm. The farm is entirely in pasture and hay. The farmer is trying to decide whether to continue to rent the farm to a neighbor who has been paying $4,800 per year pasture rent or to buy cattle and graze the land. There is enough pasture and hay to support a 60 cow herd.

Minerals, veterinary, taxes, insurance, and other miscellaneous costs will amount to $25 per cow per year. It will cost $500 annually to trade bulls. These costs total?
a.
$1,500
b.
$1,700
c.
$1,850
d.
$2,000
 

 35. 

A farmer purchased a 240 acre farm. The farm is entirely in pasture and hay. The farmer is trying to decide whether to continue to rent the farm to a neighbor who has been paying $4,800 per year pasture rent or to buy cattle and graze the land. There is enough pasture and hay to support a 60 cow herd.

The farmer can get 90% calf crop and market the calves at 500 pounds for $85 per cwt. Using the costs and returns identified above, the farmer should:
a.
rent the pasture for $4,800
b.
get into the cattle business
c.
harvest 40 acres of alfalfa and sell as a cash crop
d.
plow pasture and plant a cash crop
 

 36. 

A farmer should culled breeding stock in 2002 for $72,530 with a basis of $36,974. How much of the gain is subject to taxes on the farmer’s 2002 tax return?
a.
breeding stock is a capital item and sales of capital items are not taxed
b.
$72,530 is subject to income tax
c.
$36,974 is subject to self-employment taxes
d.
$35,974 is subject to income tax only
 

 37. 

A $80,000 loan amortized at 9% for 10 years has annual payments of $2,465.61.

How much of the first year’s payment is principal?
a.
$3,465.59
b.
$5,085.61
c.
$5,265.59
d.
$7,200.41
 

 38. 

A $80,000 loan amortized at 9% for 10 years has annual payments of $2,465.61.

If the 10th and final payment includes $1,029.27 of interest. What was the outstanding principal balance after the 9th payment?
a.
$9,102.93
b.
$11,219.04
c.
$11,436.34
d.
$13,494.87
 

 39. 

A $80,000 loan amortized at 9% for 10 years has annual payments of $2,465.61.

How much total interest is paid over the life of the loan?
a.
$7,200
b.
$44,656
c.
$72,000
d.
$124,656
 



 
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