1
AGEC 325 Exam 2 Questions with Answers (100%
Correct Answers)
What is an enterprise budget? Answer: An enterprise budget provides
an estimate of the potential revenue, expenses, and profit for a single
enterprise. Each crop or type of livestock that can be grown is an
enterprise.
What is the purpose of an enterprise budget? Answer: The primary
purpose of an enterprise budget is to estimate the projected costs,
returns, and profit per unit for the enterprises. They are often called
the building blocks of a whole-farm plan and budget.
What are the parts and structure to an enterprise budget? Answer: 1.
The name of the enterprise being budgeted and the budgeting unit are
shown first.
2. Income or revenue from the enterprise is shown next.
3. Quantity, unit, and price are included.
4. The cost section is next and is in two parts: variable (or operating)
costs and fixed (or ownership) costs.
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5. The gross margin above variable costs is an intermediate calculation
showing the remaining revenue to be applied to fixed costs.
6. Estimated profit per unit is the final value.
What is the formula for computing the break-even yield? Answer: BEY
= (total cost) / (output price)
What is the formula for computing the break-even price? Answer: BEP
= (total cost) / (expected yield)
How do you use budgets to estimate profit? Answer: The estimated
profit is found by subtracting total expenses from gross revenue.
How do you use budgets to estimate returns to--- and returns over---?
Answer: If the revenue generated through an enterprise budget is
sufficient to cover all the costs, including the opportunity costs, of
producing the crop then the return to management is positive. (Vise
versa)
What is a partial budget? Answer: A partial budget is often the
appropriate way to analyze changes involving interactions between
several enterprises.
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, 3
What does a partial budget provide? Answer: A partial budget
provides a formal and consistent method for calculating the expected
change in profit from a proposed change in the farm business. It's a
form of marginal analysis.
What are the uses of a partial budget? Answer: Example decisions that
can be analyzed with a partial budget are:
1. Whether to increase the size of, or to eliminate, a small herd of beef
cows.
2. To own harvesting equipment or custom hire harvesting.
3. To plant more barley and less wheat.
What are the components of a partial budget? Answer: 1. Additional
costs - costs that don't exist at current time but will be incurred if the
change is made.
2. Reduced Revenue - revenue that is currently received but which will
be lost or reduced if the change is made.
3. Additional Revenue - revenue to be received only if the alternative is
adopted.
© 2025 All rights reserved
AGEC 325 Exam 2 Questions with Answers (100%
Correct Answers)
What is an enterprise budget? Answer: An enterprise budget provides
an estimate of the potential revenue, expenses, and profit for a single
enterprise. Each crop or type of livestock that can be grown is an
enterprise.
What is the purpose of an enterprise budget? Answer: The primary
purpose of an enterprise budget is to estimate the projected costs,
returns, and profit per unit for the enterprises. They are often called
the building blocks of a whole-farm plan and budget.
What are the parts and structure to an enterprise budget? Answer: 1.
The name of the enterprise being budgeted and the budgeting unit are
shown first.
2. Income or revenue from the enterprise is shown next.
3. Quantity, unit, and price are included.
4. The cost section is next and is in two parts: variable (or operating)
costs and fixed (or ownership) costs.
© 2025 All rights reserved
,2
5. The gross margin above variable costs is an intermediate calculation
showing the remaining revenue to be applied to fixed costs.
6. Estimated profit per unit is the final value.
What is the formula for computing the break-even yield? Answer: BEY
= (total cost) / (output price)
What is the formula for computing the break-even price? Answer: BEP
= (total cost) / (expected yield)
How do you use budgets to estimate profit? Answer: The estimated
profit is found by subtracting total expenses from gross revenue.
How do you use budgets to estimate returns to--- and returns over---?
Answer: If the revenue generated through an enterprise budget is
sufficient to cover all the costs, including the opportunity costs, of
producing the crop then the return to management is positive. (Vise
versa)
What is a partial budget? Answer: A partial budget is often the
appropriate way to analyze changes involving interactions between
several enterprises.
© 2025 All rights reserved
, 3
What does a partial budget provide? Answer: A partial budget
provides a formal and consistent method for calculating the expected
change in profit from a proposed change in the farm business. It's a
form of marginal analysis.
What are the uses of a partial budget? Answer: Example decisions that
can be analyzed with a partial budget are:
1. Whether to increase the size of, or to eliminate, a small herd of beef
cows.
2. To own harvesting equipment or custom hire harvesting.
3. To plant more barley and less wheat.
What are the components of a partial budget? Answer: 1. Additional
costs - costs that don't exist at current time but will be incurred if the
change is made.
2. Reduced Revenue - revenue that is currently received but which will
be lost or reduced if the change is made.
3. Additional Revenue - revenue to be received only if the alternative is
adopted.
© 2025 All rights reserved
