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SAMPLE MANAGERIAL LESSON
Area:
Agricultural Business Management
Unit:
Machinery Management
Lesson # 15:
Choosing whether or not to own a combine
Competency:
Applies approved practices in marketing and purchasing to maximize return
to the business.
Need:
- Students are developing management
plans for the FFA chapter farm and need to know how to determine the
economic feasibility of replacing some of the owned machinery.
- At last chapter meeting, a committee
was appointed to explore the possibility of purchasing a new combine.
- Annually the chapter members have
harvested around 200 acres of sorghum, safflower and small grains.
- Custom combining is getting difficult
to secure when needed.
- Several members have available time to
operate a combine for custom harvesting purposes.
- Interest should be high.
Objectives:
- Given the cost, useful life, interest,
tax and insurance rates, to calculate the annual fixed costs of owning a 24
foot self-propelled combine.
- Given the annual fixed costs, custom
rate per acre and variable costs per acre, to determine the number of acres
a 24 foot self-propelled combine would need to harvest annually to
"break even".
Introduction:
- Review the needs cited above.
- Formulate a statement of the problem.
- Ask:
 | How long does it take to combine
one acre? |
| What is the hourly fuel
consumption? |
| What are the lubrication costs per
acre? |
| What does insurance cost? |
| How much are taxes on machinery? |
| Who has operated a combine? |
| Where could be purchase a combine? |
| What make should be considered? |
| How many combines are there in the
area? |
| What costs do we need to consider
if a sound decision is to be reached? |
| What other factors need to be
considered? |
Problem:
To determine whether it will pay to own a
24 foot self-propelled, combine to harvest 500 acres annually if the machine
cost $140,000 and has a useful life of seven years.
Factors to be considered:
- Annual fixed costs
- Depreciation
- Interest on investment
- Taxes
- Insurance
- Repairs
- Variable or operating costs per acre
- Fuel costs per acre
- Lubrication costs per acre
- Operator's labor per acre
- Annual total costs of owning machine
- Cost per acre =
annual costs/number acres to be used on
- Current custom rates
- Break even point
- Total annual fixed
costs/Difference between custom rate per acre and variable costs per
acre = Number of acres to justify owning combine
- Other factors to be considered:
- Ability of custom workers
- Timeliness of operation
- Mechanical ability of students
- Obsolescence
- Possibility of leasing machine
- Financial condition of the chapter
Supervised Study:
- Distribute reference materials.
- Assign each student one or more factors to
research.
- Students find answer(s) to factor(s) and be
prepared to report results to class.
Discussion:
- Distribute form and have students complete
based upon their reports of findings.
- Students report results to class.
- Discuss each factor, arrive at consenus.
- After all factors are discussed by class,
evaluate factors as a group.
- Arrive at a decision (conclusion).
Summary:
- Write the decision (conclusion) on the
board/transparency.
- Students record decision (conclusion) in their
notebooks.
Evaluation/Testing:
Make formal report to the total FFA membership.
Realia:
- Arizona Crop Budgets--UofA Extension Service.
- Hand--"A Method for Determining
Feasibility of Owning a Machine"
- List of Custom Rates
- Fuel requirement costs.
Science and Math Cocnepts:
- Calculation of percentage and ratio.
- Application of multiplication and division.
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