Agriculture Reference
In-Depth Information
Plate 12.3
Grain elevator
The breakeven point for Brookstone Feed and Grain, Inc. is that point where sales revenue just
covers total cost. Photo courtesy of USDA Natural Resources Conservation Service.
Cost of goods sold
—
variable
. For most production-oriented agribusinesses this is the largest
single variable cost. It, in fact, is a perfect example of what was depicted in the graphs
shown earlier in this chapter for variable cost. No charge is made under cost of goods
sold until the product is actually sold. If product is purchased from a supplier but not
sold by period's end, there is no charge against cost of goods sold, thus no variable
cost.
Salaries and benefi ts
—
fi x e d
. BF&G pays its manager a set salary. This represents a fi xed
cost to the fi rm. Some weeks the manager may only put in 40 hours, but during the busy
season BF&G's manager works in excess of 60 hours. The manager is paid a fi xed
amount monthly.
Full-time wages
—
fi x e d
. Although these people are paid by the hour, this is still considered
a fi xed cost. If BF&G had paid any overtime, this part of wages should be considered a
variable cost. Since it is hard to attract and retain good employees, BF&G pays workers
a minimum of 40 hours per week, even though in slow times the manager must “fi nd
work” for them to do.
Part-time wages
—
semi-variable, half fi xed, half variable
. BF&G employs some “perma-
nent” part-time people. They are paid a lower wage than their full-time counterparts and
receive fewer benefi ts. They also do not work a 40-hour week. As sales increase, part-
time hours tend to increase, thus the equal split between fi xed and variable costs.
