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As the new manager of a commercial farm recently opened from virgin bush in Kelepi...

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Accounting

As the new manager of a commercial farm recently opened from virgin bush in Kelepi Island, for commercial rice production; you must decide on how much fertilizer to apply to the first rice crop. The only information available on the likely local response of rice to fertilizer is the mean of 5 years trial on a research station in a similar-ecological area 4 miles away. This is as follows: Kg fertilizer/ha Kg paddy rice/ha 0 1700 100 2700 200 3500 300 4100 You expect fertilizer response in commercial farming to be 50% less of that obtained on the research station. You estimate that the variable costs of harvesting, shelving & transport will be about $40/tons of paddy rice. (i) What is the best fertilizer rate if fertilizer costs $900/ton and paddy fetches $300/ton? (10 marks) (ii) You speculate that the fertilizer price may rise by 20% next year and that the marketing board may raise the grain price to $600/ton. If this occurs, what would then be the best fertilizer application rate?

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