Divide and Conquer Allocations Farm Ranch Business Management
Introduction
Tractor Example
Different Approaches Hours used. Acres used.
Time Approach What is your allocation period? List expenses related to input (tractor). Determine the amount of time the input will be use per enterprise. Calculate the costs of running the equipment for an hour and then for the enterprise.
Acreage Approach Calculate the cost of running the tractor across one acre. Multiple the number of acres x the expense of running the tractor per enterprise.
Output of One Enterprise Input for Another Enterprise Use current market value of output for input.
Difficult Allocation Called “Unallocated” and added to the whole-farm analysis.
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