Farm Table says:
The title of this fact sheet is: Do you know the relative profitability of your farm’s enterprises? Many farming businesses have multiple enterprises and understanding the relative returns of each is important. Enter gross margin analysis.
This factsheet introduces key management concepts, including liquidity and efficiency, as well as introducing gross margin budgets and how to put one together.
The key steps in calculating a gross margin are:
- Calculate all annual production costs and income of a particular crop on a per-hectare basis.
- Enterprise GROSS RECEIPTS minus enterprise VARIABLE COSTS = enterprise GROSS MARGIN.
- Multiply these by the number of hectares of the crop planted to produce an enterprise total.
- Allow for fuel, oil, repairs and maintenance, and related casual labor.
- Remember to include the costs of small items such as replacement nozzles for spray equipment and replacement batteries for power equipment etc.