FBM Exam State 1996

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FBM Exam State 1996 Powered By Docstoc

Section I:      Multiple Choice-50 points
Section II:     Problems-50 points, 2 points each
                Total Points-100 points

            You will have two and one-half hours to complete both sections of this exam.
            Mark all your answers on the separate answer sheet provided. Black out
            completely the letter that corresponds to the best answer for each question. You
            may mark on any portion of this test as needed.
                                 Section I: Multiple Choice

1.     Cash flow summaries, net worth statement, income statement, and detailed-enterprise
       analysis are all forms of:
       A.      records.
       B.      cash-flow analysis.
       C.      marketing.
       D.      budget analysis.

2.     A cash-flow projection is defined as:
       A.     a written physical and financial plan that is used to compare alternative courses of
              action for the business.
       B.     the statistical calculation of the probabilities of success.
       C.     an estimate of monthly cash inflows and outflows over a period of time.
       D.     none of the above.

3.     When the price of a product is increased with no change in factors other than price, less
       product will be purchased. This is the:
       A.     Law of Supply.
       B.     Law of Demand.
       C.     Law of Elasticity.
       D.     Law of Price.

4.     Examples of records for an income tax return are:
       A.    hired help.
       B.    farm income and expenses.
       C.    depreciations schedule.
       D.    all of the above.

5.                        is a type of accounting system.
       A.       Financial
       B.       Single-entry
       C.       Cash method
       D.       Physical
                           STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 2

6.    The amount of products that are produced depend on:
      A.    new technology.
      B.    weather.
      C.    expected increase in their selling price.
      D.    all of the above.

7.    What is the single best record keeping system for everyone?
      A.     Complete farm business analysis
      B.     Cash method
      C.     Accrual method
      D.     There is no single best record keeping system for everyone

8.    Money that is owed to you at the end of the year is termed:
      A.    liabilities.
      B.    capital assets.
      C.    accounts receivable.
      D.    accounts payable.
9.    Which one of the following is not an example of market cost?
      A.    feed
      B.    livestock purchased for resale
      C.    fertilizer
      D.    raised breeding livestock
10.                  are the cash value of assets based on actual cost or market value less sale
      A.     Current values
      B.     Book values
      C.     Cash receipts
      D.     Cash expenditures
11.   Which one of the following is an example of farm income?
      A.    Interest received from savings accounts.
      B.    Income from rental houses.
      C.    Payment received for doing machine work for someone else.
      D.    Depletion income from mineral lease bonuses.
12.   Of the following, which one is NOT an example of business expenses?
      A.      insurance
      B.      utilities
      C.      conservation and land clearing
      D.      items purchased for resale
13.   The price of corn was high this year. What factor probably caused the price to be higher
      than normal?
      A.     There was a surplus of corn.
      B.     Supply was greater than demand.
      C.     There was a shortage of corn.
      D.     Too many people planted corn.
14.   Which one of the following is NOT a fixed cost?
                            STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 3

      A.     fertilizer
      B.     breeding stock
      C.     taxes
      D.     insurance

15.   In the 1996 Farm Bill the Government set the price of peanuts at a minimum of $610 a
      ton. This price setting can best be termed as a:
      A.      price ceiling.
      B.      price cap.
      C.      price floor.
      D.      price elasticity.

16.   Goals are important in farm management because:
      A.     they aren=t really all that important.
      B.     they give direction in decision making.
      C.     make it easier to acquire a loan at the bank.
      D.     both b and c.

17.                       is used to record income and expenses that cannot be attributed
      directly to an enterprise at the time incurred.
      A.      Major enterprise
      B.      Minor enterprise
      C.      Overhead enterprise
      D.      None of the above

18.   Supplemental records supply additional information which helps provide a more
      complete record system. Supplemental records provide:
      A.    a record of yields, production, and physical performance.
      B.    a record of materials and resources used.
      C.    a record of production practices and weather conditions.
      D.    all of the above

19.   Net worth equals:
      A.    Liabilities - Assets
      B.    Gross receipts - Total expenses
      C.    Assets - Liabilities
      D.    Assets + Liabilities

20.   Assets are items that have a market value. They are separated into three categories which
      are          ,          ,and           .
      A.     Current, Intermediate, and Long-term
      B.     Current, Single, and Double
      C.     Fixed, Single, and Double
      D.     Intermediate, Single, and Double
                            STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 4

21.   The ability to pay debts as they come due is called:
      A.     equity.
      B.     solvency.
      C.     liquidity.
      D.     ratio.

22.   Net Cash Income equals:
      A.     Gross Receipts - Total Expenses
      B.     Total Expenses - Gross Receipts
      C.     Gross Receipts + Total Expenses
      D.     Total Expense / Gross Receipts

23.   Out of the following, which one usually has a low capital turnover ratio and low
      A.      Cash grain operation
      B.      Dairy operation
      C.      Beef cow-calf operations
      D.      Both A & B

24.   A poultry producer is producing 100,000 broilers a year, but after determining he was in
      stage I of production he decided he needed to          . This would allow him to
      maximize his profit.
      A.      decrease his flock to a number less than 100,000.
      B.      increase his flock to a number greater than 100,000.
      C.      he is maximizing his profits with a flock of 100,000.
      D.      not enough information to determine where he should produce.

25.   You have been showing hogs for several years. An example of a variable cost in your
      established show hog project is :
      A.      hog paneling.
      B.      a water trough.
      C.      feed.
      D.      a show whip.

26.   In a production function, levels of production are divided into:
      A.      four quadrants called stage I, II, III, and IV.
      B.      three stages called I, II, and III.
      C.      two stages called I and II.
      D       four stages called A, B, C, and D.
                            STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 5

27.    Ray owns a greenhouse in North Georgia. Two hundred yards away from Ray=s
       greenhouse is a chicken house owned and operated by Marc. On a cold stormy night, part
       of the roof of the chicken house blew off into the side of the greenhouse and broke a good
       portion of the glass. This damage allowed the cold temperature to kill all of the Easter
       Lilies Ray was growing for the Easter holiday. In this case is Marc responsible for the
       A.      No, Marc is not responsible for the weather.
       B.      No, Ray=s greenhouse was to close to the chicken house by OSHA regulations,
               therefore he is not responsible for any damage.
       C.      Yes, Marc is responsible for the repair to the greenhouse, but is not responsible
               for the replacement of the Easter Lilies.
       D.      Yes, Marc is responsible for both the repairs and the Easter Lilies.

28.    Which is NOT true for the legal liabilities of a trespasser?
       A.    You are not responsible for personal injuries.
       B.    You may shoot an unthreatening trespasser in order to get him off your land.
       C.    You do not have to post signs that forewarn of danger on your land.
       D.    You do not need to make the land safe for a trespasser.

29.   A(n)                 is a marketplace where there are many businesses producing    the
       same product. A single buyer or seller can=t influence the price structure. No producer
       is so large as to control or perceptively affect market supply or demand.
       A.       monopoly
       B.       monopolistic competition
       C.       oligopoly
       D.       perfect competition

30.    Liquidity is best defined as:
       A.     the ability to meet cash obligations as they come due.
       B.     total assets minus total liabilities.
       C.     the rate of capital turn-over.
       D.     having no long-term debt.

31.    Of the following which is not an example of a tangible function?
       A.      Transporting and distributing
       B.      Financing
       C.      Buying and selling
       D.      Processing, grading, and packing

32.    By using distant banks buyers have the use of your money interest free while checks
       are in transit. What is this called?
       A.       Forward contract
       B.       Float
       C.       Expressed contract
       D.       Inferred contract
                             STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 6

33.    A cash lease is good for livestock grazing because it is simple, and reduces the  chance
       of controversy. Frank uses a cash lease when he leases grazing land. He and       the
       landowner set a fixed price per acre when they make their deal. This is the most common
       type of cash lease. The landlord may prefer the cash lease because:
       A.      it gives the landlord less control of the land.
       B.      it generally provides lower income.
       C.      there is fixed rent.
       D.      they retain an active interest in management.

34.    In the marketplace, prices depend on:
       A.      the situation at a given location.
       B.      a given time for a given quality.
       C.      a specified form of a particular commodity.
       D.      all of the above

35.    Which one is NOT an advantage of farm corporations?
       A.    Separation of ownership and management
       B.    Economic reasons
       C.    Ease of continuing in business
       D.    Unlimited liability

36.    Gail and her fellow producers often base their price expectations on past price levels.
       If prices are higher in one year, then they probably will increase production the next.
       Then the supply will increase and prices will fall. If there is an increase in demand
       the prices will:
       A.      stay the same
       B.      decrease
       C.      increase
       D.      this cannot be determined based on the data given

37.    The formula for measuring price elasticity is:
       A.     Percentage change in price/ Percentage change in quantity
       B.     Percentage change in quantity/ Percentage change in price
       C.     Price - Quantity
       D.     Price + Quantity

38.     A                    contains the financial history of your business transaction   for a
given time period.
        A.     Cash flow summary
        B.     Cash flow projection
        C.     Cash flow plan
        D.     Cash method
                             STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 7

39.    There are several ways of transferring legal ownership of property from one person to
       another. The most common are:
       A.     wills
       B.     contracts
       C.     gifts
       D.     all of the above

40.    A riparian is someone who:
       A.      owns over 1,000 acres of land.
       B.      owns cattle, hogs, and chickens.
       C.      owns land bordering a stream.
       D.      owns land bordering mountains.

41.     Dane has a herd of Angus cows. One rainy night a driver runs into the fence and then
drives away leaving the fence broken. One of the Angus cows wanders out on        the road.
Another car driven by Christy hits the cow. The cow dies and Christy=s car is damaged. Who
is responsible?
        A.      Dane
        B.      The 1st driver who ran into the fence
        C.      Christy
        D.      No ones at fault

42.    Most states have laws that govern boundary fences. In some states the fencing
       regulations are left largely to local government. Although, laws vary and are subject
       to change, which one usually prevails?
       A.      There are certain stipulations made for materials used on inside fences.
       B.      If people build a fence between their property then the state pays for it.
       C.      No state laws require landowners to enclose their land with a fence
       tight enough and strong enough to turn livestock.
       D.      There are state laws that require landowners to enclose their land with
       a fence tight enough and strong enough to turn livestock.

43.    Dana=s cow gets out and is found by Chris. Chris has several options, which one is
       NOT true?
       A.     The stray cow becomes the property of Chris after 24 hours.
       B.     Chris can confine and care for the cow but he must make a reasonable
       attempt to locate the owner of the stray.
       C.     Chris is entitled to make reasonable use of the stray cows.
       D.     When Dana comes for her cow, she must pay Chris for feed, housing,
              care and other costs.

44.    Cooperatives are best characterized by the fact that:
       A.    they operate on a profit basis.
       B.    membership in a cooperative is not voluntary.
       C.    each member has some voice in the cooperative business affair.
       D.    members do not do business with the cooperative directly.

45.    Failure to comply with the terms of a contract is known as:
                            STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 8

      A.     Breach of contract
      B.     Forward contract
      C.     Inferred contract
      D.     None of the above

46.   When demand and supply are equal, price is said to be at:
      A.    an all time high.
      B.    an all time low.
      C.    equilibrium.
      D.    elasticity.

47.   A person appointed in a will or by the court system to carry out requests and dispose
      of all property in accordance with the deceased is a:
      A.       Guardian
      B.       Estate holder
      C.       Executor
      D.       Donor

48.                 is the buying and selling of commodity futures to protect a grower or
      producer from extreme price fluctuations in the marketplace at the time the product is
      A.     Internal Rate of Return
      B.     Investment Tax Credit
      C.     Market
      D.     Hedging

49.   A farmer or rancher has certain duties toward people that are on their land. The people
      that are on the farmers or rancher=s land can be divided into three groups. Which one of
      the following is not one of the three groups?
      A.      Trespassers
      B.      Neighbors
      C.      Licensees
      D.      Invitees

50.   An independent contractor is a person or organization performing a job without control
      from the employer. The employer only determines the results. You, as an employer,
      have no control over the method used to do the job. Which of the following would be an
      independent contractor?
      A.     A custom harvester
      B.     A crop duster
      C.     A well driller
      D.     All of the above

                             STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 9

1996 State Farm Business Management Contest, Georgia FFA

Section II: Problems

Use the following information to answer questions 51-63.
Mr. Ellington is examining the financial performance of his diversified livestock operation. He
has assembled the following data:
Checking account balance                                            $10,800
Savings account balance                                             $15,500
Supplies on hand                                                    $ 1,000
Feed on hand                                                        $ 3,000
Breeding herd                                                       $75,000
Equipment                                                           $30,000
Land and buildings                                                  $27,000
Machinery loan                                                      $20,000
Feedlot equipment loan                                              $15,000
Feed bill                                                           $ 4,000
Interest on land and equipment payments                             $20,000
Mortgage on farm                                                    $35,000

51.    What is the total value of the current assets?
       A.     $29,300
       B.     $26,300
       C.     $30,300
       D.     $25,400

52.    What is the total value of the fixed assets for Mr. Ellington=s operation?
       A.     $27,000
       B.     $57,000
       C.     $29,300
       D.     $106,000

53.    Mr. Ellington=s total assets amount to:
       A.     $106,000
       B.     $162,300
       C.     $133,000
       D.     $75,000

54.    What is the total value of the intermediate assets?
       A.     $105,000
       B.     $162,300
       C.     $133,000
       D.     $79,000

55.    What is the total of Mr. Ellington=s liabilities?
       A.     $88,000
       B.     $59,000
                            STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 10

       C.     $80,000
       D.     $94,000

56.    Mr. Ellington=s business is:
       A.     current.
       B.     intermediate.
       C.     insolvent.
       D.     solvent.

57.    What is Mr. Ellington=s net worth?
       A.     -$67,400
       B.     -$67,700
       C.     $12,000
       D.     $68,300

58.    What is Mr. Ellington=s debt-equity ratio?
       A.     1.37
       B.     1.7
       C.     2.14
       D.     1.2

59.   Farmer McIntosh wants to increase the size of his Idaho potato farm. He decides that the
      only way to do this is borrow $120,000 from The First State Bank of Boise at a simple
      interest rate. Currently the interest rate is 9% and is expected to increase 1% next year.
      Therefore he is trying to see how much money he would save in interest if he were to
      borrow now as opposed to waiting a year. He intends to borrow the money for ten years.
      How much would he save by borrowing now rather than waiting a full year.
      A.      $21,000
      B.      $2,100
      C.      $12,000
      D.      $1,200

60.    Jason just bought a new tractor for $65,000. He decides that he will use the tractor for ten
       years at which time he will sell it at a salvage value of $20,000. What will be the rate of
       depreciation using the straight-line method?
       A.      $5,000/year
       B.      $6,500/year
       C.      $2,000/year
       D.      $4,500/year
                                STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 11

61.    Your catfish operation is valued at $120,000. You have a debt of $70,000 for the initial
       setup and owe an additional $10,000 for fish, feed, and equipment. Your ratio of assets to
       liabilities is....
       A.       3:2
       B.       3:1
       C.       2:2
       D.       2:1

62.    When Fred sold his crossbred show steer he received $1,075. He figured his total
       expenses to be $925. The percentage net return realized was_____.
       A.     14%
       B.     26%
       C.     05%
       D.     16%

63.    Laura needs term insurance for the next 5 years until she is vested in her retirement plan.
       Term insurance coverage of $300,000 will cost her $9 per month for 3 years from
       Company A. Company B offers her $300,000 coverage for 3 years for $3000 paid at the
       beginning of coverage and no other changes, plus, at the end of 5 years her $3000 would
       be returned. The local banks are currently paying 12% on 5 year certificates of $500 or
       more compounded yearly. Laura=s best alternative is to:
       A.      purchase from Company A
       B.      purchase from Company B
       C.      purchase one half from each Company.
       D.      the costs are so close she should choose on Company reputation
       E.      put her money in the bank at 12% and insure herself

Income Statement Analysis. Use the following information on a greenhouse operation to answer
questions 64-67.

              Income from bedding plant sales..............49,000
              Income from potted plant sales.................28,000
              Income from poinsettias............................15,000
              Building rent. ..............................................6,500
              Equipment rent ........................................... 950
              Increase in inventory supplies ....................8,000
              Hired labor expense ..................................35,000
              Cash operating expenses ................................850
              Machinery depreciation .................................850

64.    What is the net cash income for this business?
       A.     48,500
       B.     55,850
       C.     52,200
       D.     60,850

65.    What is the net income for this business?
                           STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 12

       A.     47,850
       B.     55,850
       C.     52,200
       D.     60,850

66.    What is the gross cash income for this business?
       A.     100,000
       B.       92,000
       C.       88,000
       D.       72,500

67.    If the owner worked in this business for 35 hours per week for 75 weeks, what is the
       return per hour for his work?
       A.       5.00
       B.      10.32
       C.      21.28
       D.      18.23

Marvin is doing an end-of-the-year analysis on his cotton crop. Answer questions 68-72 based
on his cotton crop data.

       900 acres were planted
       600 acres were leased at $120 per acre
       Interest on mortgage payment on 300 acres =$28,000
       price per pound = $ .81
       Total yield = 1,784 bales (one bale equals 500 lbs.)
       Fertilizer cost = $52,875
       Insecticide and Herbicide cost = $84,545
       Labor cost= $32,695
       Equipment cost= $128,935
       Other variable cost = $87,540

68.    What was Marvin=s total yield per acre?
       A. 1.25 bales
       B. 2 bales
       C. 1.98 bales
       D. 1.79 bales

69.    What was the total expenses for this crop?
       A. $402,045
       B. $486,590
       C. $433,715
       D. $453,895
                                         STATE FFA FARM BUSINESS MANAGEMENT CONTEST, GEORGIA, 1996 Page 13

70.       What is his gross income from his cotton crop?
          A. $1445.04
          B. $235,930
          C. $288,805
          D. $722,520

71.       What is his net profit from the harvest of his cotton crop?
          A. $288,805
          B. $722,520
          C. $235,930
          D. $268,625

72.       What is the break-even price per pound for his cotton crop.
          A. $ .55
          B. $ .67
          C. $ .32
          D. $ .47

The following information is to be used for questions 73-75:
A farmer wishes to fertilize his corn with 200 pounds of nitrogen per acre. He can choose
between the following three types of fertilizer at the prices shown.

                     Choice #1 - 20-0-0 at $110.00 per ton (2,000 lbs.)
                     Choice #2 - 45-0-0 at $200.00 per ton
                     Choice #3 - 82-0-0 at $325.00 per ton

73.       If the farmer selects the 45-0-0, what will be the cost per pound of actual nitrogen
          A.       $0.22
          B.        4.50
          C.        4.45
          D.        0.30

74.       Which fertilizer should be selected as the cheapest source of nitrogen?
          A.    #1
          B.    #2
          C.    #3
          D.    #1 and #2 equal

75.   Using your choice #3, how many pounds of fertilizer material must be applied per acre in
      order to apply exactly 200 pounds of actual nitrogen?
      A.      400
      B.      445
      C.      200
      D.      245
The End!
Test written by Joy Carter, Lynn Barber, and Chris Paulk. Reviewed by Dr. John McKissick and Dr. Bill Givan(Extension Economists).