FA R M M A N A G E M E N T,

ECONOMICS AND
M A R K ET I N G

1
FARM MANAGEMENT
-Study which deals with sound business principles in the
acquisition and organization of the farm including the
application and technical know-how in its operation in
order to generate maximum and continuous profit for the
farm.
-Study of the ways and means of organizing land, labor and
capital and the application of technical knowledge and skill
in order that the farm may be made to yield the maximum
net returns.
2
SEQUENTIAL MANAGEMENT
FUNCTIONS

1. _________________________ -
process of establishing goals and a
suitable course of action for achieving
those goals.

3
SEQUENTIAL MANAGEMENT
FUNCTIONS
2. _________________________ -
process of arranging and allocating
work, authority and resources among an
organization's members so that they
can achieve the organization's goals.
4
SEQUENTIAL MANAGEMENT
FUNCTIONS

3. _________________________ -
concerned with locating prospective
employees to fill the job created by the
organizing process.

5
SEQUENTIAL MANAGEMENT
FUNCTIONS

4. _________________________ -
is aimed at getting members of the
organization to move in the direction
that will achieve its objectives.

6
SEQUENTIAL MANAGEMENT
FUNCTIONS
5. _________________________ -
process of ensuring that actual
activities conform to planned activities.
Managers attempt to assure that the
organization is moving toward its goals.
7
SEQUENTIAL MANAGEMENT
FUNCTIONS
6. _________________________ -
process of directing and influencing the
task-related activities of group
members or an entire organization.
Managers direct and influence
subordinates. 8
TERMS

1. PLANNING -
process of establishing goals and a
suitable course of action for achieving
those goals.

9
TERMS

2. ORGANIZING -
process of arranging and allocating
work, authority and resources among an
organization's members so that they
can achieve the organization's goals.
10
TERMS

3. STAFFING -
concerned with locating prospective
employees to fill the job created by the
organizing process.

11
TERMS

4. DIRECTING -
is aimed at getting members of the
organization to move in the direction
that will achieve its objectives.

12
TERMS

5. CONTROLLING -
process of ensuring that actual
activities conform to planned activities.
Managers attempt to assure that the
organization is moving toward its goals.
13
TERMS

6. LEADING -
process of directing and influencing the
task-related activities of group
members or an entire organization.
Managers direct and influence
subordinates. 14
TERMS

7. ____________________________ -
People who are responsible for helping
the organizations achieve their goals.

15
TERMS

8. ____________________________ -
One of the managerial roles,
interpersonal role; act as a go-between

16
TERMS

9. ____________________________ -
One of the managerial roles,
informational role; check what is going
on outside the relationship

17
TERMS

10. ____________________________ -
One of the managerial roles,
decisional role; discussing and debating
on certain issues

18
TERMS

7. MANAGER -
People who are responsible for helping
the organizations achieve their goals.

19
TERMS

8. LIAISON -
One of the managerial roles,
interpersonal role; act as a go-between

20
TERMS

9. MONITOR -
One of the managerial roles,
informational role; check what is going
on outside the relationship

21
TERMS

10. NEGOTIATOR -
One of the managerial roles,
decisional role; discussing and debating
on certain issues

22
TERMS

11. ____________________________ -
ability to get things done correctly;
doing things right; an “input-output”
concept; something measurable.

23
TERMS

12. ____________________________ -
ability to choose appropriate objectives
or the appropriate means for achieving
a given objective; doing the right things.

24
TERMS

13. ____________________________ -
It is a source of farm labor mainly
supplied by the family circle.

25
TERMS

14. ____________________________ -
It is a source of farm labor supplied
from outside of the family.

26
TERMS
15. ____________________________ -
(classification of farm jobs) should
come first and must be done in clear
weather with moderately dry soil.
Plowing, preparing the seedbed, and
planting crops must be done at just the
right time to be most effective.
27
TERMS
16. ____________________________ -
(classification of farm jobs) include
tasks as hauling manure, building
fences, plowing, husking corn, ditching
and tiling, cutting and hauling wood and
outside repairs to buildings.
28
TERMS
17. ____________________________ -
(classification of farm jobs) in order
that no time will be wasted by
downpour, indoor work such as
repairing machinery, sharpening mower
sickles and oiling machinery and
harness should be kept in mind.
29
TERMS
18. ____________________________ -
include any goods employed in
production other than land, labor,
buildings and fences. All work-stock,
machinery, equipment, power engines,
feed, seed, fertilizer and other materials
are included in this category.
30
TERMS
19. ____________________________ -
ease with which the organization of
production can be changed.

31
TERMS
20. ____________________________ -
the maintenance of balance of money or
assets that can be readily converted
into cash.

32
TERMS

11. EFFICIENCY -
ability to get things done correctly;
doing things right; an “input-output”
concept; something measurable.

33
TERMS

12. EFFECTIVENESS -
ability to choose appropriate objectives
or the appropriate means for achieving
a given objective; doing the right things.

34
TERMS

13. FAMILY LABOR -

It is a source of farm labor mainly
supplied by the family circle.

35
TERMS

14. HIRED LABOR -

It is a source of farm labor supplied
from outside of the family.

36
TERMS
15. FIELDWORK -
(classification of farm jobs) should
come first and must be done in clear
weather with moderately dry soil.
Plowing, preparing the seedbed, and
planting crops must be done at just the
right time to be most effective.
37
TERMS
16. OUTSIDE WORK THAT CAN BE
DEALYED -
(classification of farm jobs) include
tasks as hauling manure, building
fences, plowing, husking corn, ditching
and tiling, cutting and hauling wood and
outside repairs to buildings.
38
TERMS
17. WORK FOR RAINY DAYS -
(classification of farm jobs) in order
that no time will be wasted by
downpour, indoor work such as
repairing machinery, sharpening mower
sickles and oiling machinery and
harness should be kept in mind.
39
TERMS
18. CAPITAL -
include any goods employed in
production other than land, labor,
buildings and fences. All work-stock,
machinery, equipment, power engines,
feed, seed, fertilizer and other materials
are included in this category.
40
TERMS
19. FLEXIBILITY -
ease with which the organization of
production can be changed.

41
TERMS
20. LIQUIDITY -
the maintenance of balance of money or
assets that can be readily converted
into cash.

42
TERMS
21. ____________________________ -
a collaborative enterprise, frequently
involving research or design, that is
carefully planned to achieve a particular
aim; a problem that needs to be solved.

43
TERMS
22. ____________________________ -
a series of steps that needs to be
executed in order to realize a certain
goal.

44
TERMS
23. The following are project
classifications according to purpose
EXCEPT:
a. Research-oriented project
b. Economy-oriented project
c. Profit-oriented project
d. Service-oriented project 45
TERMS
24. Which of the following are project
classifications according to discipline:
I. Agricultural II. Industrial
III. Commercial IV. Social

a. I & II only c. I, II, III, IV

b. II & III only d. I & III only 46
TERMS
25. ____________________________ -
formal, approved document used to guide
both project execution and project control;
primary uses are to document planning
assumptions and decisions, facilitate
communication among stake-holders, and
document approved scope, cost and
schedule baselines. 47
TERMS

26. ____________________________ -
is a horizontal bar chart that graphically
displays the time relationships between
the different tasks in a project.

48
TERMS

27. ____________________________ -
is the planning, scheduling and controlling
of project activities to meet project
objectives.

49
TERMS

28. ____________________________ -
- the process by which a farm manager
looks ahead to the future and
contemplates alternative courses of action
for the farm.
50
TERMS

29. ____________________________ -
an organization owned collectively by
members who share its profits and
benefits.

51
TERMS

30. ____________________________ -
a group of people who gets a charter
granting, as a body, certain legal rights
and liabilities of a single individual.

52
TERMS
21. PROJECT -
a collaborative enterprise, frequently
involving research or design, that is
carefully planned to achieve a particular
aim; a problem that needs to be solved.

53
 Choosing type
Preparing the
Choosing of research Endorsement
proposal
research topic grant/ funding by University
agency

Answer by
Return of Submission to
proponent
comments to Review of funding
point-by-
proponent proposal agency
point;
revision
If approved, fulfill other
requirements;
Re-evaluation CONGRATULATIONS!
Final action:
by funding approval or
agency If not approved,
disapproval try and try
again! 54
TERMS
22. PROJECT PLANNING -
a series of steps that needs to be
executed in order to realize a certain
goal.

55
Project Plan - answers the basic questions about the project:

What? – What is the problem or value proposition addressed by the

project? What is the work that will be performed on the project?
What are the major products/deliverables?

Why? – Why is it being sponsored?

Who? – Who will be involved and what will be their responsibilities

within the project? How will they be organized?

When? – When will it be completed? (What is the project timeline

and when will particularly meaningful points, referred to as
milestones, be complete?)
56
TERMS
23. The following are project
classifications according to purpose
EXCEPT:
a. Research-oriented project
b. Economy-oriented project
c. Profit-oriented project
d. Service-oriented project 57
TERMS
24. Which of the following are project
classifications according to discipline:
I. Agricultural II. Industrial
III. Commercial IV. Social

a. I & II only c. I, II, III, IV

b. II & III only d. I & III only 58
TERMS
25. PROJECT PLAN -
formal, approved document used to guide
both project execution and project control;
primary uses are to document planning
assumptions and decisions, facilitate
communication among stake-holders, and
document approved scope, cost and
schedule baselines. 59
 Project Planning and
Management Approaches

1. Multi-disciplinary – recommended
for medium- to large-scale projects
2. Individual discipline – recommended
for small- scale projects
60
TERMS

26. GANTT CHART -

is a horizontal bar chart that graphically
displays the time relationships between
the different tasks in a project.

61
62
TERMS

27. PROJECT MANAGEMENT -

is the planning, scheduling and controlling
of project activities to meet project
objectives.

63
TERMS

28. FARM PLANNING -

- the process by which a farm manager
looks ahead to the future and
contemplates alternative courses of action
for the farm.
64
TERMS

29. COOPERATIVE -
an organization owned collectively by
members who share its profits and
benefits.

65
TERMS

30. CORPORATION -
a group of people who gets a charter
granting, as a body, certain legal rights
and liabilities of a single individual.

66
TERMS
31. ____________________________ -
concerned with the farmer as a member
of society, deals with the farms as a
group and determines the principles
governing not only the farm business but
also the general welfare on a national and
international level. 67
TERMS

32. ____________________________ -
having enough money to pay debts as
they fall due.

68
TERMS

33. ____________________________ -
the amount of economic value generated
by the activity carried on within each
production unit in the economy.

69
TERMS

34. ____________________________ -
the exchange value of goods or services
measured in terms of money.

70
TERMS

35. ____________________________ -
when exports equal imports.

71
TERMS

36. ____________________________ -
the additional cost that a producer incurs
in making one additional unit of output.

72
TERMS

37. ____________________________ -
growing more than one crop on the same
area in a year.

73
TERMS

38. ____________________________ -
type of farming, which engages in the
production of several main
products/crops.

74
TERMS

39. ____________________________ -
the area devoted to, and the sequence of,
crops produced by a farmer or in a region.

75
TERMS

40. ____________________________ -
refers to the grade of land whose
productive capacity is only enough to
recover its cost of production.

76
TERMS
31. Agricultural Economics -
concerned with the farmer as a member
of society, deals with the farms as a
group and determines the principles
governing not only the farm business but
also the general welfare on a national and
international level. 77
TERMS

32. SOLVENCY -
having enough money to pay debts as
they fall due.

78
TERMS

33. VALUE ADDED -

the amount of economic value generated
by the activity carried on within each
production unit in the economy.

79
TERMS

34. PRICE -
the exchange value of goods or services
measured in terms of money.

80
TERMS

35. BALANCE OF TRADE -

when exports equal imports.

81
TERMS

36. MARGINAL COST -

the additional cost that a producer incurs
in making one additional unit of output.

82
TERMS

37. MULTIPLE CROPPING -

growing more than one crop on the same
area in a year.

83
TERMS

38. DIVERSIFIED FARMING -

type of farming, which engages in the
production of several main
products/crops.

84
TERMS

39. CROPPING PATTERN -

the area devoted to, and the sequence of,
crops produced by a farmer or in a region.

85
TERMS

40. MARGINAL LAND -

refers to the grade of land whose
productive capacity is only enough to
recover its cost of production.

86
TERMS

41. ____________________________ -
the interest paid in one period.

87
TERMS

42. ____________________________ -
is the interest paid not only on the
amount borrowed but also on the interest
earned in previous periods.

88
TERMS

43. ____________________________ -
a tax levied on an import.

89
TERMS

44. ____________________________ -
payment for the use of capital.

90
TERMS

45. ____________________________ -
when peso becomes cheaper compared
to foreign currency.

91
TERMS

46. ____________________________ -
economic resources (things of value)
owned by a business, which are expected
to benefit future operations.

92
TERMS

47. ____________________________ -
also called net benefit; in project
analysis, the amount remaining after all
outflows are subtracted from all inflows.

93
TERMS

48. ____________________________ -
fund collected by the government to
finance its activities.

94
TERMS

49. ____________________________ -
the tax imposed by the government on
imported goods.

95
TERMS

50. ____________________________ -
is the rise in the amount of money in
circulation beyond the legitimate needs of
the business so as to cause a reduction in
the value of money and increases the
price level.
96
TERMS

41. SIMPLE INTEREST -

the interest paid in one period.

97
TERMS

42. COMPOUND INTEREST -

is the interest paid not only on the
amount borrowed but also on the interest
earned in previous periods.

98
TERMS

43. DUTY -
a tax levied on an import.

99
TERMS

44. INTEREST -
payment for the use of capital.

100
TERMS

45. DEVALUATION -
when peso becomes cheaper compared
to foreign currency.

101
TERMS

46. ASSETS -
economic resources (things of value)
owned by a business, which are expected
to benefit future operations.

102
TERMS

47. CASH FLOW -

also called net benefit; in project
analysis, the amount remaining after all
outflows are subtracted from all inflows.

103
TERMS

48. TAX -
fund collected by the government to
finance its activities.

104
TERMS

49. TARIFF -
the tax imposed by the government on
imported goods.

105
TERMS

50. INFLATION -
is the rise in the amount of money in
circulation beyond the legitimate needs of
the business so as to cause a reduction in
the value of money and increases the
price level.
106
TERMS

51. ____________________________ -
refers to the cultivation of land with or
without the benefit of sound business,
technical knowledge and skills.

107
TERMS

52. ____________________________ -
pertains to farming activities utilizing
fixed outlay of labor and capital to an
increasing area of land.

108
TERMS

53. ____________________________ -
a method of farming which utilizes an
increasing amount of labor and capital to
the same area of land.

109
TERMS

54. ____________________________ -
a system of grouping continuous land
holding for the purpose of operating as
one farmstead, resources for production
are pooled together from among the other
member.
110
TERMS

55. ____________________________ -
is the cost outlay of the firm for the wear
and tear of machines, buildings, and
implements. It is a part of the total fixed
cost of the business.
111
TERMS

56. ____________________________ -
is the ratio of the percentage change in
quantity demanded to the percentage
change in price.

112
TERMS
57. ____________________________ -
the economic principle which states that
a successive portion of quantities of
variable factors of production is other
factor of production which is fixed will
result in diminishing marginal
productivity, at least after some points.
113
TERMS

58. ____________________________ -
is the technique of buying and selling that
minimizes risk due to price fluctuation.

114
TERMS

59. ____________________________ -
is the income derived from the sale of
goods.

115
TERMS

60. ____________________________ -

= Current Assets – Current Liabilities

116
TERMS

51. FARMING -
refers to the cultivation of land with or
without the benefit of sound business,
technical knowledge and skills.

117
118
TERMS

52. EXTENSIVE FARMING -

pertains to farming activities utilizing
fixed outlay of labor and capital to an
increasing area of land.

119
TERMS

53. INTENSIVE FARMING -

a method of farming which utilizes an
increasing amount of labor and capital to
the same area of land.

120
TERMS

54. COMPACT FARMING -

a system of grouping continuous land
holding for the purpose of operating as
one farmstead, resources for production
are pooled together from among the other
member.
121
TERMS

55. DEPRECIATION COST -

is the cost outlay of the firm for the wear
and tear of machines, buildings, and
implements. It is a part of the total fixed
cost of the business.
122
TERMS

56. ELASTICITY OF DEMAND -

is the ratio of the percentage change in
quantity demanded to the percentage
change in price.

123
TERMS
57. LAW OF DIMINISHING RETURN -
the economic principle which states that
a successive portion of quantities of
variable factors of production is other
factor of production which is fixed will
result in diminishing marginal
productivity, at least after some points.
124
TERMS

58. HEDGING -
is the technique of buying and selling that
minimizes risk due to price fluctuation.

125
TERMS

59. REVENUE -
is the income derived from the sale of
goods.

126
TERMS

60. NET WORKING CAPITAL -

= Current Assets – Current Liabilities

127
FARM ECONOMICS
-is concerned with the farmer as a member
of society. It deals with the farms as a group
and determines the principles governing not
only the farm business but also the general
welfare on a national and international level.

128
FUNCTIONS:
There are five (5) basic functions if the economy is to grow
and develop;
1. To determine what goods and services are to be
produced.
2. To organized the production of goods and services to
conform to the wishes of consumers.
3. To distribute the product.
4. To maintain or increase production over time when
necessary; and
5. To establish a favorable demand and supply relationship
in the market. 129
Factors of Production
1. Land
2. Labor
3. Resources
4. Capital
5. Manager/Owner/Entrepreneur
130
TERMS
FARM ECONOMICS
1. ____________________________ -
provides the engineers with the tools
such as the present value of net benefits,
discounted benefit to cost ratio, and
internal rate of return that are used as
investment criteria for selection among
several farm projects under 131
Short Review:
Capital is wealth in the form of money or property that can be
2.________–
used to produce more wealth; it involves commitment of capital
for extended period of time (time value)

Basic Categories:
Equity Capital
3._________________– that owned by the individuals who have
invested their money or property in a business project or venture
in the hope of receiving a profit
Debt Capital/Borrowed Capital is obtained from lenders for
4.______________________________–
investment; in return, the lenders receive interest from the
borrowers

Interest – periodic compensation for the lending of money; time

5. ________
value of money
132
 SIMPLE Interest
6. ___________
When the total interest earned or charged
is directly proportional to the initial amount of
loan (principal), the interest rate, and the
number of interest periods for which the
principal is committed, the interest and the
SIMPLE
interest rate are said to be __________.

133
 I=PxNxi
where P – principal
N – number of interest periods (e.g. years)
i – interest rate per interest period

7. P = P1,000 loaned for 3 years at a simple interest

rate of 10% per annum
I = P1,000 x 3 x 0.10 = P300
Total amount owed at the end of 3 years
= P1,000 + 300 = P1,300 134
 COMPOUND Interest
8. _____________
Whenever the interest charge for any
interest period (ex. Years) is based on the
remaining principal amount plus any
accumulated interest charges up to the
beginning of that period, the interest is said to
COMPOUNDED
be __________________.

135
 r
_ nt
A = P (1 + n )
A = amount P = Principal
r = interest rate t = time (yrs)
n = number of times interest
is compounded per year

9. P = same P1,000 loaned for 3 years at

an interest rate of 10% compounded in 3
years.
136
9. P = same P1,000 loaned for 3 years at
an interest rate of 10% compounded in 3
years. r nt
_
A = P (1 + n )

A = 1,331
Compound interest is much more common in
practice than is simple interest.
137
138
NOTATION AND CASH FLOW
DIAGRAMS/TABLES

i = effective interest rate per interest period

N = number of compounding periods
P = present sum of money; the equivalent
worth of one or more cash flows at a reference
point in time called the present
139
NOTATION AND CASH FLOW
DIAGRAMS/TABLES
F = future sum of money; the equivalent
worth of one or more cash flows at a reference
point in time called the future
A = end-of-period cash flows (or equivalent
end-of-period values) in a uniform series
continuing for a specified number of periods,
starting at the end of the first period
140
i – effective interest rate per interest period; N – number of interest periods
A – uniform series amount (occurs at the end F – future worth
of each interest period) P – present worth 141
i – effective interest rate per interest period; N – number of interest periods
A – uniform series amount (occurs at the end F – future worth
of each interest period) P – present worth 142
5 Basic Methods – to assess the economic
merits of a single cash flow profile resulting
from a proposed problem solution.
Equivalent Worth
1. Present Worth (PW)
2. Annual Worth (AW)
3. Future Worth (FW)
Rate of Return
1. Internal Rate of Return (IRR)
2. External Rate of Return (ERR) 143
TERMS
PRESENT WORTH
10. ____________________________ -
the equivalent value of money at the
present based on Time Value of Money.

144
TERMS
FUTURE WORTH
11. ____________________________ -
the equivalent value at a designated
future date based on time value of
money.

145
TERMS
ANNUAL WORTH
12. ____________________________ -
a uniform annual amount for a prescribed
number of years that is equivalent in
value to the present worth of any
sequence of financial events for a given
interest rate.
146
Consider a problem with a series of year-end
cash flows extending over eight years. The
amounts are $100 for the first year, $200 for
the second year, $500 for the third year, and
$400 for each year from the fourth through
the eight. It is desired to find the equivalent
(13) present worth, (14) future worth, and
(15) annual worth of these cash flows if the
annual interest rate is 20%.
147
Solution:
(13) To find the
equivalent present
worth, Po, one needs
to sum the worth of
all payments as of the
beginning of the first
year (time 0).

P0 = F1 (P/F, 20%, 1) + F2 (P/F, 20%, 2) + F3 (P/F,

20%, 3) + A(P/F, 20%, 5)(P/F, 20%, 3)
= $100 (0.8333) + $200 (0.6944) + $500 (0.5787) +
$400 (2.9906)(0.5787) = $1,203.82 148
Solution:
(14) To find the
equivalent future
worth, F8, one can
sum the worth of all
payments as of the
end of the eight year
(time 8). Since the
equivalent present
worth is already F8 = Po (F/P, 20%, 8)
known to be
$1,203.82, one can = $1,203.82 x 4.2998
calculate directly = $5,176.19
149
 Solution:
(15) The equivalent
annual worth of the
irregular series can
be calculated directly
from either Po of F8,
as follows:

A = Po (A/P, 20%, 8) A = F8 (A/F, 20%, 8)

= $1,203.82 x 0.2606 = $5,176.19 x 0.0606
= $ 313.73 or = $ 313.73
150
TERMS
PRESENT WORTH
16. ____________________________ -
METHOD
is based on the concept of equivalent
worth of all cash flows relative to some
base or beginning point in time called the
present.

Total PW = PW of cash receipts – PW of cash outlays

151
(17) A piece of new equipment has been proposed by
engineers to increase the productivity of a certain manual
welding operation. The initial investment (first cost) is
$25,000, and the equipment will have a salvage value of
$5,000 at the end of the study period of 5 years. Increased
productivity attributable to the equipment will amount to
$8,000 per year after extra operating costs have been
subtracted from the value of the additional production.
Thus, it is obvious that the “do nothing” alternative has
been considered in estimating these cash flows. If the
firm’s minimum attractive rate of return (before income
taxes) is 20% per year, is this proposal a sound one? Use
the present worth method. 152
Solution:
Total PW = PW of cash receipts – PW of cash outlays

Total PW = $8,000
(P/A, 20%, 5) + $5,000
(P/F, 20%, 5) - $25,000
= $ 934.29

Because PW > 0, this

equipment is
economically justified. 153
TERMS
ANNUAL WORTH METHOD -
18. ____________________________
- is its annual equivalent receipts (or
savings) (R) minus annual equivalent
expenses (E), less its annual equivalent
capital recovery (CR) amount.

154
 AW = R – E – CR
where CR = I (A/P, i%, N) – S(A/F, i%, N)
= capital recovery cost is the equivalent uniform
annual cost of the capital invested. It is an annual amount
that covers depreciation (loss in value of the asset) and
interest on invested capital (MARR).
I – initial investment for the project
S – salvage (residual) value at the end of study
period.
N – project study period
155
(19) A piece of new equipment has been proposed by
engineers to increase the productivity of a certain manual
welding operation. The initial investment (first cost) is
$25,000, and the equipment will have a salvage value of
$5,000 at the end of the study period of 5 years. Increased
productivity attributable to the equipment will amount to
$8,000 per year after extra operating costs have been
subtracted from the value of the additional production.
Thus, it is obvious that the “do nothing” alternative has
been considered in estimating these cash flows. If the
firm’s minimum attractive rate of return (before income
taxes) is 20% per year, is this proposal a sound one? Use
the annual worth method. 156
Solution:
AW(20%) = R – E – CR
= $8,000 - [$25,000 (A/P, 20%, 5) - $5,000 (A/F, 20%, 5)
= $8,000 – ($8,359.49 - $671.90)
= $ 312.41

Because AW is positive, the equipment more than

pays for itself over a period of 5 years while earning
a 20% return per year on the uncovered investment.

157
TERMS
FUTURE WORTH METHOD -
20. ____________________________
- is exactly comparable to the present
worth method except that all cash inflows
and outflows are compounded forward to
a reference point in time called the
future.
158
(21) A piece of new equipment has been proposed by
engineers to increase the productivity of a certain manual
welding operation. The initial investment (first cost) is
$25,000, and the equipment will have a salvage value of
$5,000 at the end of the study period of 5 years. Increased
productivity attributable to the equipment will amount to
$8,000 per year after extra operating costs have been
subtracted from the value of the additional production.
Thus, it is obvious that the “do nothing” alternative has
been considered in estimating these cash flows. If the
firm’s minimum attractive rate of return (before income
taxes) is 20% per year, is this proposal a sound one? Use
the future worth method. 159
Solution:
FW = -$25,000 (F/P, 20%, 5) + $8,000 (F/A, 20%, 5) + $5,000
= $2,324.80 > 0

Again, the equipment is shown to be a good

investment. The FW is a larger number compared to
the corresponding AW and PW, and it is equivalent
to:

160
TERMS

22. ____________________________ -
is the cost of getting an activity started.
Ordinarily occurs only once for any given
activity.

161
TERMS

23. ____________________________ -
are those that are unaffected by changes
in activity level over a feasible range of
operations for the capacity available.

162
TERMS

24. ____________________________ -
are those associated with an operation
that will vary in total with the quantity of
output.

163
TERMS

25. ____________________________ -
are costs experienced continually over
the useful life of an investment project or
venture; contains most of the recurring
costs associated with operating a
business or project.
164
TERMS

26. ____________________________ -
are those that can be reasonably
measured and allocated to a specific
output or work activity.

165
TERMS

27. ____________________________ -
are those that are difficult to attribute or
allocate to a specific output or work
activity.

166
TERMS

28. ____________________________ -
is the cost of the best rejected
(foregone) opportunity and is often
hidden or implied.

167
TERMS

29. ____________________________ -
it is one that has occurred in the past and
has no relevance to estimates of future
costs and revenues related to an
alternative course of action.
168
TERMS

30. ____________________________ -
is a locus of points which show the
schedule of quantity of goods that
consumers will buy at different prices.

169
TERMS

22. FIRST COST -

is the cost of getting an activity started.
Ordinarily occurs only once for any given
activity.

170
TERMS

23. FIXED COSTS -

are those that are unaffected by changes
in activity level over a feasible range of
operations for the capacity available.

171
TERMS

24. VARIABLE COSTS -

are those associated with an operation
that will vary in total with the quantity of
output.

172
TERMS
25. OPERATION AND MAINTENANCE
COSTS
are costs experienced continually over the
useful life of an investment project or
venture; contains most of the recurring
costs associated with operating a
business or project. 173
TERMS

26. DIREST COSTS -

are those that can be reasonably
measured and allocated to a specific
output or work activity.

174
TERMS

27. INDIRECT COSTS -

are those that are difficult to attribute or
allocate to a specific output or work
activity.

175
TERMS

28. OPPORTUNITY COST -

is the cost of the best rejected
(foregone) opportunity and is often
hidden or implied.

176
TERMS

29. SUNK COST -

it is one that has occurred in the past and
has no relevance to estimates of future
costs and revenues related to an
alternative course of action.
177
TERMS

30. DEMAND CURVE -

is a locus of points which show the
schedule of quantity of goods that
consumers will buy at different prices.

178
Elasticity of demand which is the ratio
of the change in price and change in
quantity demanded defines the
responsiveness of the consumers to
price changes and it us intended to
guide producers of goods or sellers to
anticipate their market supply of goods
and maximize income or profit.
179
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
31. _______ - small change in price
creates a bigger change in quantity
demand.

180
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
32. _______ - bigger change in price
creates a small change in quantity
demanded.

181
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
33. _______ - the change in price and
change in quantity demanded are
inversely proportional.

182
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
34. _______ - demand curve is
horizontal.

183
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
35. _______ - demand curve is vertical.

184
36. _____________ - COMPETITIVE
this class of product PRODUCTS
includes such
SUPPLEMENTAR
combination as lamb
and wool, beef and Y PRODUCTS
hides. This JOINT PRODUCTS
combination do not
COMPLEMENTAR
compete on the
resources use.
Y PRODUCTS
185
37. _____________ -
two products are COMPETITIVE
complementary where PRODUCTS
a transfer of resources
to one product an
SUPPLEMENTAR
increase in the Y PRODUCTS
production of it are JOINT PRODUCTS
accompanied by
COMPLEMENTAR
increased production
of the other.
Y PRODUCTS
186
38. _____________ - COMPETITIVE
two products are PRODUCTS
competitive if an
SUPPLEMENTAR
increase in production
of one makes a Y PRODUCTS
reduction in the other JOINT PRODUCTS
necessary given a
particular level of COMPLEMENTAR
resources. Y PRODUCTS
187
39. _____________ - COMPETITIVE
two products are PRODUCTS
supplementary if the
SUPPLEMENTAR
production of one can
be increased without Y PRODUCTS
increasing or JOINT PRODUCTS
decreasing production
of the other.
COMPLEMENTAR
Y PRODUCTS 188
TERMS
40. _______ - means uniform amount
of money occurring at the end of each
period for n periods with interest at
i% per period. It is often called
annuity.

189
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
31. ELASTIC DEMAND - small change
in price creates a bigger change in
quantity demand.

190
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
32. INELASTIC DEMAND - bigger
change in price creates a small change
in quantity demanded.

191
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
33. UNITARY DEMAND ELASTICITY -
the change in price and change in
quantity demanded are inversely
proportional.
192
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
34. PERFECTLY ELASTIC DEMAND -
demand curve is horizontal.

193
TERMS
(31-35) 5 Kinds of Elasticity of
Demand
35. PERFECTLY INELASTIC DEMAND
- demand curve is vertical.

194
36. _____________ - COMPETITIVE
this class of product PRODUCTS
includes such
SUPPLEMENTAR
combination as lamb
and wool, beef and Y PRODUCTS
hides. This JOINT PRODUCTS
combination do not
COMPLEMENTAR
compete on the
resources use.
Y PRODUCTS
195
37. _____________ -
two products are COMPETITIVE
complementary where PRODUCTS
a transfer of resources
to one product an
SUPPLEMENTAR
increase in the Y PRODUCTS
production of it are JOINT PRODUCTS
accompanied by
COMPLEMENTAR
increased production
of the other.
Y PRODUCTS
196
38. _____________ - COMPETITIVE
two products are PRODUCTS
competitive if an
SUPPLEMENTAR
increase in production
of one makes a Y PRODUCTS
reduction in the other JOINT PRODUCTS
necessary given a
particular level of COMPLEMENTAR
resources. Y PRODUCTS
197
39. _____________ - COMPETITIVE
two products are PRODUCTS
supplementary if the
SUPPLEMENTAR
production of one can
be increased without Y PRODUCTS
increasing or JOINT PRODUCTS
decreasing production
of the other.
COMPLEMENTAR
Y PRODUCTS 198
TERMS
40. UNIFORM SERIES - means
uniform amount of money occurring
at the end of each period for n periods
with interest at i% per period. A
uniform series is often called annuity.

199
TERMS
41. The percentage of money charged
as interest is called ________________.

200
TERMS
42. ____________________________- is
the actual or exact rate of interest
earned on the principal during one
year. Note that it is expressed on an
annual basis.

201
TERMS
43. ____________________________- is
the most widely used method, and is
also known as investor's method,
discounted cash flow method, and
profitability index.

202
TERMS
44. ____________________________- is
the decrease in value of physical
properties with the passage of time.

203
TERMS
45. ____________________________- is
the present worth of all the future
profits that are to be received through
ownership of a particular property.

204
TERMS
46. ____________________________- is
the price that can be obtained from the
sale of the property after it has been
used. It is the best estimate of an
asset’s net market value at the end of
its useful life.
205
TERMS
47. ____________________________- is
the worth of a property as shown on
the accounting records of a company.

206
TERMS
48. ____________________________- is
the distribution of the cost of certain
types of property, usually intangible,
over a prescribed period of time that
are usually made in equal installments.

207
TERMS
49. ____________________________- is
the period of time over which
depreciation deductions are used to
off- set taxable income in determining
income taxes.

208
TERMS
50. ____________________________- is
the period of time as asset is kept in
productive use in a trade or business.

209
TERMS
41. The percentage of money charged
as interest is called INTEREST RATE.

210
TERMS
42. EFFECTIVE ANNUAL RATE –
is the actual or exact rate of
interest earned on the principal
during one year. Note that it is
expressed on an annual basis.

211
TERMS
43. INTERNAL RATE OF RETURN
METHOD - is the most widely used
method, and is also known as
investor's method, discounted cash
flow method, and profitability index.

212
TERMS
44. DEPRECIATION - is the decrease
in value of physical properties with the
passage of time.

213
TERMS
45. VALUE - is the present worth of all
the future profits that are to be
received through ownership of a
particular property.

214
TERMS
46. SALVAGE VALUE is the price that
can be obtained from the sale of the
property after it has been used. It is
the best estimate of an asset’s net
market value at the end of its useful
life.
215
TERMS
47. BOOK VALUE is the worth of a
property as shown on the accounting
records of a company.

216
TERMS
48. AMORTIZATION - is the
distribution of the cost of certain types
of property, usually intangible, over a
prescribed period of time that are
usually made in equal installments.

217
TERMS
49. TAX LIFE - is the period of time
over which depreciation deductions are
used to off- set taxable income in
determining income taxes.

218
TERMS
50. USEFUL LIFE - is the period of
time as asset is kept in productive use
in a trade or business.

219
51. A loan of $10,000 is made today at an
interest rate of 15%, and the first payment
of $3000 is made 4 years later. The
amount that is still due on the loan after
the first payment is most nearly

(A) $7000 (B) $8050

(C) $8500 (D) $14,500
220
loan due = ($10k)(F/P,15%,4) – $3000
= ($10k)(1 + 0.15)4 – $3000
= ($10k)(1.7490) – $3000
= $14,490 ($14,500)

Therefore, (D) is correct.

221
52. A machine is purchased for $1000 and
has a useful life of 12 years. At the end of
12 years, the salvage value is $130. By
straight-line depreciation, what is the book
value of the machine at the end of 8 years?
(A) $290 (B) $330
(C) $420 (D) $580

222
BV = $1000 – ($1000 – $130)(8/12)
= $1000 – $580
= $420

Therefore, (C) is correct.

223
53. With an interest rate of 8%
compounded semiannually, the value of a
$1000 investment after 5 years is most
nearly
(A) $1400
(B) $1470
(C) $1480
(D) $1800
224
ie = (1 + r/m)^m –
= ((1 + 0.08/2)^2) – 1 = 0.0816
F = ($1000)(F/P,8.16%,5)
= ($1000)((1 + 0.0816)^5)
= ($1000)(1.480) = $1480

Therefore, (C) is correct.

225
1. ______________________- is
the process of planning and
executing the conception,
pricing, promotion and
distribution of ideas, good and
services to create exchanges
and satisfy individual and
organizational goals.
226
1. MARKETING - is the process
of planning and executing the
conception, pricing, promotion
and distribution of ideas, good
and services to create
exchanges and satisfy
individual and organizational
goals.
227
Agricultural Marketing refers to all
activities necessary to effect the
transfer of agricultural products
from the farm to the hands of
ultimate consumers.

228
2. _____________________- in
marketing, these are tangible
products that consumers can
evaluate by touching, seeing or
hearing

229
3. _____________________- in
marketing, these are intangible
products that offer financial,
legal, medical, recreational
benefits to the customer

230
4. _____________________- in
marketing, this is the value,
usually in monetary terms, that
sellers ask for in exchange for
products they are offering

231
5. _____________________- the
variety of techniques, including
advertising, sales promotion,
public relations and personal
selling, that are used to
communicate with customers
and potential customers 232
6. _____________________- the
process of moving products
from producer to consumer,
which may involve several
steps and channels

233
TERMS
(7-11) Types of Market Structures
7. _______ - is a market situation
represented by several sellers of goods
in the market handling standardize
products.

234
TERMS
(7-11) Types of Market Structures
8. _______ - is a market situation
represented by several buyers of goods
with a few or one seller controlling the
total supply in the market.

235
TERMS
(7-11) Types of Market Structures
9. _______ - is a market situation
influenced by monopoly and
competition.

236
TERMS
(7-11) Types of Market Structures
10. _______ - is a market situation
represented by few big dealers and
several small sellers of goods that
create collusions or cartel in the
industry.
237
TERMS
(7-11) Types of Market Structures
11. _______ - is a market situation
exemplified by several sellers with one
or few buyers of goods in the market.
This type of market is very prevalent in
the agricultural sector.
238
2. GOODS - in marketing, these
are tangible products that
consumers can evaluate by
touching, seeing or hearing

239
3. SERVICES - in marketing,
these are intangible products
that offer financial, legal,
medical, recreational benefits
to the customer

240
4. PRICING - in marketing, this
is the value, usually in
monetary terms, that sellers
ask for in exchange for
products they are offering

241
5. PROMOTION - the variety of
techniques, including
advertising, sales promotion,
public relations and personal
selling, that are used to
communicate with customers
and potential customers
242
6. DISTRIBUTION - the process
of moving products from
producer to consumer, which
may involve several steps and
channels

243
TERMS
(7-11) Types of Market Structures
7. COMPETITION - is a market
situation represented by several sellers
of goods in the market handling
standardize products.

244
TERMS
(7-11) Types of Market Structures
8. MONOPOLY - is a market situation
represented by several buyers of goods
with a few or one seller controlling the
total supply in the market.

245
TERMS
(7-11) Types of Market Structures
9. MONOPOLISTIC COMPETITION - is
a market situation influenced by
monopoly and competition.

246
TERMS
(7-11) Types of Market Structures
10. OLIGOPOLY - is a market situation
represented by few big dealers and
several small sellers of goods that
create collusions or cartel in the
industry.
247
TERMS
(7-11) Types of Market Structures
11. MONOPSONY - is a market
situation exemplified by several sellers
with one or few buyers of goods in the
market. This type of market is very
prevalent in the agricultural sector.
248
TERMS

12. _______ - is the place where buyers

and sellers of agriculture meet and
transact business.

249
TERMS

13. _______ - is an individual that

effect the transfer of agricultural
products in the market. They are either
buyers or sellers of goods.

250
TERMS

14. _______ - refers to the passage of

route of the product from the farmer
producer to the ultimate consumers.

251
TERMS

15. _______ - is the schedule of

quantity of goods that buyers will be
willing to buy at alternative prices.

252
TERMS

15. _______ - is the schedule of

quantity of goods that sellers will be
willing to sell.

253
TERMS

12. MARKET - is the place where

buyers and sellers of agriculture meet
and transact business.

254
TERMS

13. MARKETEER - is an individual that

effect the transfer of agricultural
products in the market. They are either
buyers or sellers of goods.

255
TERMS

14. MARKET CHANNEL - refers to the

passage of route of the product from
the farmer producer to the ultimate
consumers.

256
TERMS

15. DEMAND - is the schedule of

quantity of goods that buyers will be
willing to buy at alternative prices.

257
TERMS

15. SUPPLY - is the schedule of

quantity of goods that sellers will be
willing to sell.

258
Fundamental Laws of Supply and Demand
(LSD)

• Law I – when demand is greater than the

supply at a given situation, the price will rise
(D>S,P)
• Law II – when demand is less than the
supply, price will fall (D>S, P )
• Law III – when demand is equal to the supply,
price is fixed (D=S,P)
259
Factors that Affect the Marketing of Agricultural
Products:

▪ Perishability
▪ Bulkiness in rotation to value
▪ Seasonality of production
▪ Climactic factors
▪ Elasticity of demand and supply

260