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ACHARYA N. G. RANGA AGRICULTURAL UNIVERSITY
Agricultural College, Naira
B.Sc. (Hons.) Agriculture
Course No: AECO 341 (1+1)
Farm Management, Production and Resource Economics
Assignment-2 on
Cost concepts(A1,A2,B1,B2,C1,C2,C3), incomemeasures likefarm business
income,owned farmbusiness income,family labour income,net income and farm
investment income fromthe data collected from Buravilli village of gara mandal
of srikakulamdistrict
Submitted to : submitted by :
Dr.V.Rajendra Prasad sir, CH.Eshwar saiPrasad
Associateprofessor, Id.no : NA-2017-014
Department of agriculturaleconomics A-batch
NAIRA 3rd
year
COST CONCEPTS
The item of cost of cultivation cover both the paid – out costs
(out of pocket Expenses) and the imputed costs .The items Covered under these costs
are:
a. Paid – out Costs
 Hired labour (human, animal and machinery)
 Maintenance expenses on owned animals and machinery.
 Expenses on material inputs such as seed (home grown and purchased),
fertilizer, manure, (owned and purchased), pesticides and irrigation
 Depreciation on implements and Farm buildings such as cattle sheds ,
machine sheds, storage sheds.
 Land revenue
 Rent paid for leased-in land
 Miscellaneous expenses.
b. Imputed Costs
 Value of family labour.
 Managerial input of Family.
 Rent of owned land
 Interest on owned Fixed Capital for which the Farmer does not incur any
cash expenses data are to be analyzed on the basis of following concepts
of costs
Basic data from the farmer
1.Name of the farmer : V.Appa rao
Ph.no : 9618772208
2.village : Buravilli (gara mandal, srikakulam district)
3.Main occupation : farming
4.Subsidiary occupation : weaving
5.family labour : male 1 (rs /-400/each/day)
Female 1 (rs/-200/each/day)
6.land holding : 2 and ½ acres
a)owned : 1 and ½ acres
b) leased in : 1 acre
c)leased out : nil
7. total extent of operational holding
a)rainfed : nil
b)irrigated : 1.70 acre
c) irrigated dry : 80 cents
8.live stock details : nil
9.farm buildings : nil
10.irrigation equipment : no equipments
11.quantity of seed purchased : 2 bags (rs /-1800)
12.fertilizers
a) urea : 2 bags (rs /-800)
b) DAP : 1 bag (rs/-600)
c) SSP : 1 bag (rs/-900)
13.plant protection chemicals
a)for pests : 2000/-
b) diseases : 2500/-
14. yield
a)kharif (paddy) : 53 bags
b)rabi (paddy) : 59 bags
* 15 bags are retained for family consumption
Cost A1 includes following :
 value of hired human labour
 Value of hired bullock labour
 Value of owned bullock labour
 Value of owned machinery labour
 Hired machinery charges
 Value of seed(both farm produced and purchased)
 Value of insecticides and pesticides
 Value of manure ( owned and purchased)
 Value of fertilizer
 Depreciation on implements and farm buildings
 Irrigation Charges
 Land revenue, cesses and other taxes.
 Interest on working capital
Cost A1
 Value of human labour = (3*15*400) +(5*20*200)
= 18000+20000
= 38000/-
Remarks : 3 men works for the 15 days at the wage rate of 400 per day
5 women works for the 20 days at the wage rate of 200 per day
 Value of machine power = 2200+3000+7200
= 12400/-
Remarks : -- for ploughing tractor costs about 1100 /- per season for one season
--for puddling tractor costs about 1500/- per season for one season
-- for harvesting multi crop thresher costs 3600/- per 6 hours in one season
It requires 6 hours to harvest in 1 ha crop
 Value of seeds = 550 * 2
=1100
Remarks : each seed bag consists of 30 kg seed. Each bag costs about 550/-
 Value of manures and fertilizers = 1600+1200+1800
=4600/-
Remarks : 2 bags of urea + 1 bag of DAP+1 bag of SSP are used in 1 season
 Value of plant protection =4000+5000 (protection from pests and diseases respectively
=9000/-
 Value of weedicides = 0 (as no weedicides are used by the farmer )
 Value of irrigation = 199/- ( source : TNAU agricultural portel …, from the cost of
cultivation of 1 ha paddy)
Interest on working capital = (Labour costs + material costs) * ST loan interest rate(%) *
(half crop period/12)
= (Labour costs + material costs) * (7/100) * (Half of crop
period/12)
=(38000+14700) * (6.15/100) * (4/12)
=Rs.9763.15/-
 Other miscellaneous expenses = 2000/-
s.no Component Cost (Rs)
1 Value of human labour 38000
2 Value of bullock power 00.00
3 Value of machine power 12400
4 Value of seeds 1100
5 Value of manures and fertilizers 4600
6 Value of plant protection 9000
7 Value of weedicides 00.00
8 Value of irrigation 199
9 Depreciation on farm building 00.00
10 Interest on working capital 9763.15
11 Other miscellaneous expenses 2000
COST A1 = TOTAL= Rs. 77062.15/-
Breaking of different components of cost A1
Fixed costs
item formulae value
Land revenue 00.00
Depreciation (Original Cost – Junk Value)/Expected = Useful life
of the Asset
00.00
Rental value of owned land Rental value of land in that locality per
year/Number of crops cultivated per year
12000
Interest on owned land (Present value of all assets excluding land)*
(10/100)]Number of crops cultivated per year
00.00
TOTAL FIXED COSTS Rs.12000/-
Value of human labour
Value of bullock power
Value of machine power
Value of seeds
Value of manures and
fertilizers
Value of plant protection
Value of weedicides
Value of irrigation
Depreciation on farm building
Interest on working capital
Other miscellaneous expenses
Cost A2 = Cost A1 + Rent paid for leased in land
= 77062.15+ 8000
=Rs. 85062.15/-
Cost B1: = Cost A1 + Interest on the value of owned capital assets (excluding land).
Interest rate of long - term government floated loans or securities: 10 per cent.
= 77062.15+615
= Rs. 77677.15 /-
Cost B2 : Cost B1 + Rental value of owned land (less land revenue) and Rent paid for
leased in land.
= 77677.15 +12000+8000
= Rs.97677.15/-
Cost C1 = Cost B1 + Imputed value of family labour
= 77677.15 +(1*30*400)+(1*30*200)
= 77677.15 +8000+4000
= Rs.89677.15 /-
Remarks : There are certain items for which no money is actually spent but they do
contribute towards the growth of a crop. Proper evaluation of such items in terms of
money equivalent is important for correct assessment of cost production. Thus family
labour is an important input in the enterprise, but no money is paid by the farmer to
his family members for the work done on the farm. So here by I consider as my farmer family
consisits of him and his wife and they worked for 30 days respectively. So calculation was done
based on normal wage rate.
Cost C2 : = Cost B2 + Imputed value of family labours
= 97677.15+ 12000
= Rs.109677.15/-
Cost C3 : = Cost C2 + 10 % of Cost C2
= 109677.15 + 10967.715
= Rs.110713.865/-
Income measures related to different cost concepts
1.Farm Business Income
2.Owned Farm Business Income
3.Family LabourIncome
4.Net Income
5.. Farm Investment Income
1.Farm business income : gross returns – cost A1
* gross returns = 53 bags (kharif) + 59 bags (rabi)
= (53*80)+(59*90)
= 8960 kg
= 89.60 q
MSP for 1 quintol rice during 20190is Rs.1815/-
= 89.60*1815
= Rs.162624/.
Farm business income : gross returns – cost A1
= 162624 – 77062.15
= Rs.85562.85 /-
2.owned farm business income : Gross Return - Cost A2
= 162624 - 85062.15
= Rs.77561.85 /-
3.family labour income : = Gross Return - Cost B2
= 162624 - 97677.15
= Rs.64476.85/-
4.Net income = Gross Returns - Cost C2
= 162624 -109677.15
= Rs. 52947.85/-
5.Farm investment income : = Net Income + Imputed rental value of owned land + Interest on
fixed capital (Charged at the rate of 10 per cent on the present
value of fixed assets.
= 44021.71 + 12000 + 8460
= Rs.64481/-
Summery :
Costs
S.no cost Value(Rs/-)
1 A1 77062.15
2 A2 85062.15
3 B1 77677.15
4 B2 97677.15
5 C1 89677.15
6 C2 109677.15
7 C3 110713.865
Value(Rs/-)
A1
A2
B1
B2
C1
C2
C3
0
20000
40000
60000
80000
100000
120000
A1 A2 B1 B2 C1 C2 C3
Value(Rs/-)
Value(Rs/-)
Income measures
s.no Income measure Value(Rs/-)
1. Farm business income 85562.85
2. owned farm business income 77561.85
3. family labour income 64476.85
4. Net income 52947.85
5. Farm investment income 64481.00
Value(Rs/-)
Farm business income
owned farm business
income
family labour income
Net income
Farm investment income
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
Axis
Title
Value(Rs/-)
Value(Rs/-)
*b/c ratio = 162624/97677.15
= 1.66
*Rate of returns = (Gross returns – Cost C2) / Cost C2
= (162624-109677.15)/ 109677.15
= 0.51
Conclusions :
1) As the benefit cost ratio is about 1.66 the farmers condition is satisfactory.
2) From the above data and calculations it was concluded that farmer spending mostly on
hired labour.
3) Though he leased in land it was creating profits for him based on the costs incurred on
it.
4) Rental value for leased in land is less when compared to other areas districts of Andhra
Pradesh
5) Cultivation of rice crop in the rabi season gives the more profits.
6) Cost incurred on pesticides is more as the farmer mainly suffering from the the pests
such as BPH
7) From the profits received from the agri enterprise farmer is willing to buy pair of cattle.
8) As the farmer”s family consists of two members they are satisfactory towards these
profits.
9) Farmer should adopt integrated farming practices in order to reduce his costs.
10) Using multi crop thresher along with the other farmers at the same helps the farmer to
reduce some amount of costs.
Note :
The above data and calculations are purely based on the farmers’s info
but not based on the general recommendations and farming practices . calculations were
done both kharif and rabi as the farmer cultivated only rice in both seasons. Information
was gathered from direct interaction with farmer as well as through phone call.
References :
 A word document provided by the Dr.V.Rajendra prasadsir on cost concepts
 CACP (2000). ‘Reports of the Commission for Agril. Costs and Prices for the Crops
cost concepts and cpst of cultivation

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cost concepts and cpst of cultivation

  • 1. ACHARYA N. G. RANGA AGRICULTURAL UNIVERSITY Agricultural College, Naira B.Sc. (Hons.) Agriculture Course No: AECO 341 (1+1) Farm Management, Production and Resource Economics Assignment-2 on Cost concepts(A1,A2,B1,B2,C1,C2,C3), incomemeasures likefarm business income,owned farmbusiness income,family labour income,net income and farm investment income fromthe data collected from Buravilli village of gara mandal of srikakulamdistrict Submitted to : submitted by : Dr.V.Rajendra Prasad sir, CH.Eshwar saiPrasad Associateprofessor, Id.no : NA-2017-014 Department of agriculturaleconomics A-batch NAIRA 3rd year
  • 2. COST CONCEPTS The item of cost of cultivation cover both the paid – out costs (out of pocket Expenses) and the imputed costs .The items Covered under these costs are: a. Paid – out Costs  Hired labour (human, animal and machinery)  Maintenance expenses on owned animals and machinery.  Expenses on material inputs such as seed (home grown and purchased), fertilizer, manure, (owned and purchased), pesticides and irrigation  Depreciation on implements and Farm buildings such as cattle sheds , machine sheds, storage sheds.  Land revenue  Rent paid for leased-in land  Miscellaneous expenses. b. Imputed Costs  Value of family labour.  Managerial input of Family.  Rent of owned land  Interest on owned Fixed Capital for which the Farmer does not incur any cash expenses data are to be analyzed on the basis of following concepts of costs
  • 3. Basic data from the farmer 1.Name of the farmer : V.Appa rao Ph.no : 9618772208 2.village : Buravilli (gara mandal, srikakulam district) 3.Main occupation : farming 4.Subsidiary occupation : weaving 5.family labour : male 1 (rs /-400/each/day) Female 1 (rs/-200/each/day) 6.land holding : 2 and ½ acres a)owned : 1 and ½ acres b) leased in : 1 acre c)leased out : nil 7. total extent of operational holding a)rainfed : nil b)irrigated : 1.70 acre c) irrigated dry : 80 cents 8.live stock details : nil 9.farm buildings : nil 10.irrigation equipment : no equipments 11.quantity of seed purchased : 2 bags (rs /-1800)
  • 4. 12.fertilizers a) urea : 2 bags (rs /-800) b) DAP : 1 bag (rs/-600) c) SSP : 1 bag (rs/-900) 13.plant protection chemicals a)for pests : 2000/- b) diseases : 2500/- 14. yield a)kharif (paddy) : 53 bags b)rabi (paddy) : 59 bags * 15 bags are retained for family consumption Cost A1 includes following :  value of hired human labour  Value of hired bullock labour  Value of owned bullock labour  Value of owned machinery labour  Hired machinery charges  Value of seed(both farm produced and purchased)  Value of insecticides and pesticides  Value of manure ( owned and purchased)  Value of fertilizer  Depreciation on implements and farm buildings  Irrigation Charges
  • 5.  Land revenue, cesses and other taxes.  Interest on working capital Cost A1  Value of human labour = (3*15*400) +(5*20*200) = 18000+20000 = 38000/- Remarks : 3 men works for the 15 days at the wage rate of 400 per day 5 women works for the 20 days at the wage rate of 200 per day  Value of machine power = 2200+3000+7200 = 12400/- Remarks : -- for ploughing tractor costs about 1100 /- per season for one season --for puddling tractor costs about 1500/- per season for one season -- for harvesting multi crop thresher costs 3600/- per 6 hours in one season It requires 6 hours to harvest in 1 ha crop  Value of seeds = 550 * 2 =1100 Remarks : each seed bag consists of 30 kg seed. Each bag costs about 550/-  Value of manures and fertilizers = 1600+1200+1800 =4600/- Remarks : 2 bags of urea + 1 bag of DAP+1 bag of SSP are used in 1 season  Value of plant protection =4000+5000 (protection from pests and diseases respectively =9000/-  Value of weedicides = 0 (as no weedicides are used by the farmer )  Value of irrigation = 199/- ( source : TNAU agricultural portel …, from the cost of cultivation of 1 ha paddy)
  • 6. Interest on working capital = (Labour costs + material costs) * ST loan interest rate(%) * (half crop period/12) = (Labour costs + material costs) * (7/100) * (Half of crop period/12) =(38000+14700) * (6.15/100) * (4/12) =Rs.9763.15/-  Other miscellaneous expenses = 2000/- s.no Component Cost (Rs) 1 Value of human labour 38000 2 Value of bullock power 00.00 3 Value of machine power 12400 4 Value of seeds 1100 5 Value of manures and fertilizers 4600 6 Value of plant protection 9000 7 Value of weedicides 00.00 8 Value of irrigation 199 9 Depreciation on farm building 00.00 10 Interest on working capital 9763.15 11 Other miscellaneous expenses 2000 COST A1 = TOTAL= Rs. 77062.15/-
  • 7. Breaking of different components of cost A1 Fixed costs item formulae value Land revenue 00.00 Depreciation (Original Cost – Junk Value)/Expected = Useful life of the Asset 00.00 Rental value of owned land Rental value of land in that locality per year/Number of crops cultivated per year 12000 Interest on owned land (Present value of all assets excluding land)* (10/100)]Number of crops cultivated per year 00.00 TOTAL FIXED COSTS Rs.12000/- Value of human labour Value of bullock power Value of machine power Value of seeds Value of manures and fertilizers Value of plant protection Value of weedicides Value of irrigation Depreciation on farm building Interest on working capital Other miscellaneous expenses
  • 8. Cost A2 = Cost A1 + Rent paid for leased in land = 77062.15+ 8000 =Rs. 85062.15/- Cost B1: = Cost A1 + Interest on the value of owned capital assets (excluding land). Interest rate of long - term government floated loans or securities: 10 per cent. = 77062.15+615 = Rs. 77677.15 /- Cost B2 : Cost B1 + Rental value of owned land (less land revenue) and Rent paid for leased in land. = 77677.15 +12000+8000 = Rs.97677.15/- Cost C1 = Cost B1 + Imputed value of family labour = 77677.15 +(1*30*400)+(1*30*200) = 77677.15 +8000+4000 = Rs.89677.15 /- Remarks : There are certain items for which no money is actually spent but they do contribute towards the growth of a crop. Proper evaluation of such items in terms of money equivalent is important for correct assessment of cost production. Thus family labour is an important input in the enterprise, but no money is paid by the farmer to his family members for the work done on the farm. So here by I consider as my farmer family consisits of him and his wife and they worked for 30 days respectively. So calculation was done based on normal wage rate.
  • 9. Cost C2 : = Cost B2 + Imputed value of family labours = 97677.15+ 12000 = Rs.109677.15/- Cost C3 : = Cost C2 + 10 % of Cost C2 = 109677.15 + 10967.715 = Rs.110713.865/- Income measures related to different cost concepts 1.Farm Business Income 2.Owned Farm Business Income 3.Family LabourIncome 4.Net Income 5.. Farm Investment Income 1.Farm business income : gross returns – cost A1 * gross returns = 53 bags (kharif) + 59 bags (rabi) = (53*80)+(59*90) = 8960 kg = 89.60 q MSP for 1 quintol rice during 20190is Rs.1815/- = 89.60*1815 = Rs.162624/.
  • 10. Farm business income : gross returns – cost A1 = 162624 – 77062.15 = Rs.85562.85 /- 2.owned farm business income : Gross Return - Cost A2 = 162624 - 85062.15 = Rs.77561.85 /- 3.family labour income : = Gross Return - Cost B2 = 162624 - 97677.15 = Rs.64476.85/- 4.Net income = Gross Returns - Cost C2 = 162624 -109677.15 = Rs. 52947.85/- 5.Farm investment income : = Net Income + Imputed rental value of owned land + Interest on fixed capital (Charged at the rate of 10 per cent on the present value of fixed assets. = 44021.71 + 12000 + 8460 = Rs.64481/-
  • 11. Summery : Costs S.no cost Value(Rs/-) 1 A1 77062.15 2 A2 85062.15 3 B1 77677.15 4 B2 97677.15 5 C1 89677.15 6 C2 109677.15 7 C3 110713.865 Value(Rs/-) A1 A2 B1 B2 C1 C2 C3 0 20000 40000 60000 80000 100000 120000 A1 A2 B1 B2 C1 C2 C3 Value(Rs/-) Value(Rs/-)
  • 12. Income measures s.no Income measure Value(Rs/-) 1. Farm business income 85562.85 2. owned farm business income 77561.85 3. family labour income 64476.85 4. Net income 52947.85 5. Farm investment income 64481.00 Value(Rs/-) Farm business income owned farm business income family labour income Net income Farm investment income 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 Axis Title Value(Rs/-) Value(Rs/-)
  • 13. *b/c ratio = 162624/97677.15 = 1.66 *Rate of returns = (Gross returns – Cost C2) / Cost C2 = (162624-109677.15)/ 109677.15 = 0.51 Conclusions : 1) As the benefit cost ratio is about 1.66 the farmers condition is satisfactory. 2) From the above data and calculations it was concluded that farmer spending mostly on hired labour. 3) Though he leased in land it was creating profits for him based on the costs incurred on it. 4) Rental value for leased in land is less when compared to other areas districts of Andhra Pradesh 5) Cultivation of rice crop in the rabi season gives the more profits. 6) Cost incurred on pesticides is more as the farmer mainly suffering from the the pests such as BPH 7) From the profits received from the agri enterprise farmer is willing to buy pair of cattle. 8) As the farmer”s family consists of two members they are satisfactory towards these profits. 9) Farmer should adopt integrated farming practices in order to reduce his costs. 10) Using multi crop thresher along with the other farmers at the same helps the farmer to reduce some amount of costs. Note : The above data and calculations are purely based on the farmers’s info but not based on the general recommendations and farming practices . calculations were done both kharif and rabi as the farmer cultivated only rice in both seasons. Information was gathered from direct interaction with farmer as well as through phone call. References :  A word document provided by the Dr.V.Rajendra prasadsir on cost concepts  CACP (2000). ‘Reports of the Commission for Agril. Costs and Prices for the Crops