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A Partial Budgeting: Switch from CRP Prgram to Hay Harvesting Particulars Amount in $ Particulars Amount in $ Added Income due to Change Added Cost Due to Change Income from Hay Production 35,000 Variable Cost of Production 3,000 (Production per ton * No. of Acres* Selling price per ton) ( $120 acre per four year / 4 years) * 100 Acres Fertilizer Cost 5,000 Reduced Cost Due to Change (Cost per Acre * No. of Acres) Cost of Weed Control per annum 600 Cost of Custom Harvestor 12,500 ( Cost per ton * total production per annum) Reduced Income due to Change Annual Income from CRP 8,500 A 35,600 B 29,000 Net Change 6,600 B Grandparents should take out their land from CRP program and should plant it in Hay. Since, the net change shown in Parial Budget as above in positive, which means income from Hay production is much better than CRP program C. Since, Land Charges is fixed cost of the land. Therefore, whether or not same is included in partial budget the outcome will not be different. Since, for all type of options the land charge cost will be same E. If CRP program annual payment if $ 155 Partial Budgeting: Switch from CRP Prgram to Hay Harvesting Particulars Amount in $ Particulars Amount in $ Added Income due to Change Added Cost Due to Change Income from Hay Production 35,000 Variable Cost of Production 3,000 (Production per ton * No. of Acres* Selling price per ton) ( $120 acre per four year / 4 years) * 100 Acres Fertilizer Cost 5,000 Reduced Cost Due to Change (Cost per Acre * No. of Acres) Cost of Weed Control per annum 600 Cost of Custom Harvestor 12,500 ( Cost per ton * total production per annum) Reduced Income due to Change Annual Income from CRP 15,500 A 35,600 B 36,000 Net Change -400 If CRP program pay $155 per annum for single acre then it is not feasible for Grandparents to take out their land from CRP. Since, as per above Partial Budget the net change is negative, which reflects the income from option to harvest in hay is less than CRP program
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