Math Formulas

Question 1

Gross Output:
It’s the Value of products produced in the enterprise (ie livestock) it will also include income for hire work, services and fees.

Gross Output = (Sales + Closing Stock) – (Livestock Purchases + Opening Stock)

Question 2

Net Profit/Net Margin:
Both are the same. This calculation takes into account all of the overhead costs associated with running a business and the variable costs
Net Profit/Margin = Gross Output – (Variable + Fixed Costs)

Question 3

Gross Margin:
This is a good way to compare production and all economic efficiencies.
Gross Margin = Gross Output – Variable Costs

Question 4

Total Fixed Costs:
Fixed is for farm i.e. ESB, land lease machinery repairs, phone bills etc.
They can’t be allocated to a specific enterprise.

Question 5

Variable Costs:
These costs can be allocated to a specific enterprise for example; fertiliser, feed, vet bills and casual labour.

Question 6

A farmer has a gross output of €45,000 costs include: Fertiliser @ €1750, €1200 on Feed, €1500 insurance, €4000 land €650 on the vet.
Whats the farmers Gross margin?
Gross Margin = Gross Output – Variable Costs
45000 – (1750+1200+650)
45000 – 3600
GM = €41,400
Calculate the Gross Output of the farm below:

Cattle sales €17000
Cattle purchases €13000
Opening inventory value €55000
Closing inventory value €59000

Gross Output = (Sales + Closing Stock) – (Livestock Purchases + Opening Stock)
(17000 + 59000) – (13000 + 55000)
GO = 76000 – 68000 = €8000

Calculate the net profit of the following:
Gross output = €88,000
Fixed costs €15,000 Variable costs 28,000

Net Profit/Margin = Gross Output – (Variable + Fixed Costs)

Net profit = 88000 – (15000+28000)
88000 – 43000 = €45,000