Farmer Ned wants to cash in on the increased demand for ethanol. Accordingly, he purchased...
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Farmer Ned wants to cash in on the increased demand for ethanol. Accordingly, he purchased a corn farm in Iowa. Ned believes his corn crop can be sold to an ethanol plant for $9.45 per bushel. Variable cost associated with growing and selling a bushel of corn is $6.70. Neds annual fixed cost is $366,850.
Use the contribution margin ratio to calculate break even point sales.
a. What is the break-even point in sales dollars?
What is the break-even point in bushels of corn?
If Neds farm is 1,150 acres, how many bushels must he produce per acre to break even? bushels per acre?
b. If Ned actually produces 181,000 bushels, what is the margin of safety in bushels?
If Ned actually produces 181,000 bushels, what is the margin of safety in dollars?
If Ned actually produces 181,000 bushels, what is the margin of safety as a percentage? Round your answer to two decimal places.
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