Farm Management — Agriculture Economics Reviewer Questions

12 board-style Farm Management items for the Agriculturist Licensure Examination, free and open to every examinee. Fixed versus variable, average versus marginal, and cost versus return are the distinctions most items are built on. Get those clean first.

12 questions in this topic · part of Agriculture Economics · every answer explained

Practise Farm Management free

Sample Farm Management questions with answers and explanations

Board-style items taken from the Agriculture Economics bank. Every answer is explained, which is the part that makes a review question worth doing twice.

A rice enterprise earns PHP 150,000 gross. Variable costs are PHP 85,000 and fixed costs PHP 30,000. What is the gross margin?
- A. PHP 65,000 correct
- B. PHP 35,000
- C. PHP 115,000
- D. PHP 120,000
Why: Gross margin = gross income - VARIABLE costs = 150,000 - 85,000 = PHP 65,000. Subtracting fixed costs as well gives net farm income (PHP 35,000). Gross margin is the correct measure for comparing enterprises, because fixed costs are borne by the whole farm rather than by any one crop.
Using the same enterprise -- gross PHP 150,000, variable PHP 85,000, fixed PHP 30,000 -- what is the net farm income?
- A. PHP 65,000
- B. PHP 35,000 correct
- C. PHP 120,000
- D. PHP 20,000
Why: Net farm income = 150,000 - 85,000 - 30,000 = PHP 35,000. This is the figure that answers whether the whole farm business is viable, whereas gross margin answers only which enterprise contributes most toward the fixed burden.
A farm produces 5 t/ha of palay sold at PHP 19/kg, with total production cost of PHP 62,000/ha. What is the cost of production per kilogram?
- A. PHP 19.00
- B. PHP 6.60
- C. PHP 12.40 correct
- D. PHP 3.26
Why: 62,000 / 5,000 kg = PHP 12.40 per kg, against a selling price of PHP 19, leaving PHP 6.60 margin per kg. Cost per kilogram is the figure that tells a farmer how far the price can fall before production stops being worthwhile.
A partial budget for shifting from hand weeding to herbicide shows: added cost PHP 4,500, reduced cost PHP 9,000, added return PHP 2,000, reduced return PHP 1,000. What is the net change?
- A. PHP 4,500 gain
- B. PHP 10,500 gain
- C. PHP 2,500 loss
- D. PHP 5,500 gain correct
Why: Net change = (added return + reduced cost) - (added cost + reduced return) = (2,000 + 9,000) - (4,500 + 1,000) = 11,000 - 5,500 = PHP 5,500 gain. Partial budgeting counts only what CHANGES, which is why unaffected costs never appear in it.
Total farm assets are PHP 2,400,000 and total liabilities PHP 960,000. What is the debt-to-asset ratio, and how is it read?
- A. 0.40 -- creditors finance 40% of assets correct
- B. 2.50 -- assets cover liabilities 2.5 times
- C. 0.67 -- creditors finance 67% of assets
- D. 1.44 -- equity exceeds liabilities
Why: 960,000 / 2,400,000 = 0.40. Owner equity is therefore PHP 1,440,000, or 60%. A ratio at or below 0.40 is generally considered a sound solvency position; the inverse (2.50) is the equity multiplier and answers a different question.
A farm has current assets of PHP 320,000 and current liabilities of PHP 200,000. What does the current ratio indicate?
- A. 0.625 -- inadequate short-term liquidity
- B. 1.6 -- adequate short-term liquidity correct
- C. 1.6 -- the farm is insolvent
- D. 120,000 -- working capital is sufficient
Why: Current ratio = 320,000 / 200,000 = 1.6, meaning short-term assets cover short-term obligations 1.6 times. Working capital, the PHP 120,000 difference, is a related but separate measure. Liquidity concerns the next twelve months; solvency concerns the whole balance sheet.
A tractor is used 800 hours a year. Fixed costs are PHP 96,000/year and variable costs PHP 250/hour. What is the total cost per hour?
- A. PHP 250
- B. PHP 120
- C. PHP 370 correct
- D. PHP 346
Why: Fixed cost per hour = 96,000 / 800 = PHP 120; add variable PHP 250 to get PHP 370 per hour. Charging only the variable rate would under-recover the machine's ownership cost, and the farm would be unable to replace it at the end of its life.
Using the tractor above, how does the total cost per hour change if annual use rises to 1,200 hours?
- A. It stays at PHP 370 because the rates do not change
- B. It rises to PHP 410 because more hours cost more
- C. It falls to PHP 250 because fixed costs disappear
- D. It falls to PHP 330 because fixed cost is spread further correct
Why: Fixed cost per hour becomes 96,000 / 1,200 = PHP 80, so total is PHP 330. Spreading ownership cost over more hours is the main economic argument for custom hiring out idle machinery: the machine's fixed cost is incurred whether it runs or not.

Practise the full Agriculture Economics bank free

Farm Management — Agriculture Economics Reviewer Questions

Sample Farm Management questions with answers and explanations

A rice enterprise earns PHP 150,000 gross. Variable costs are PHP 85,000 and fixed costs PHP 30,000. What is the gross margin?

Using the same enterprise -- gross PHP 150,000, variable PHP 85,000, fixed PHP 30,000 -- what is the net farm income?

A farm produces 5 t/ha of palay sold at PHP 19/kg, with total production cost of PHP 62,000/ha. What is the cost of production per kilogram?

A partial budget for shifting from hand weeding to herbicide shows: added cost PHP 4,500, reduced cost PHP 9,000, added return PHP 2,000, reduced return PHP 1,000. What is the net change?

Total farm assets are PHP 2,400,000 and total liabilities PHP 960,000. What is the debt-to-asset ratio, and how is it read?

A farm has current assets of PHP 320,000 and current liabilities of PHP 200,000. What does the current ratio indicate?

A tractor is used 800 hours a year. Fixed costs are PHP 96,000/year and variable costs PHP 250/hour. What is the total cost per hour?

Using the tractor above, how does the total cost per hour change if annual use rises to 1,200 hours?

Other Agriculture Economics topics