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The table below shows the budget of an emerging farmer for a period of a year - NSC Agricultural Sciences - Question 3 - 2017 - Paper 2

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The table below shows the budget of an emerging farmer for a period of a year. ITEM COSTS (R) ITEM ... show full transcript

Worked Solution & Example Answer:The table below shows the budget of an emerging farmer for a period of a year - NSC Agricultural Sciences - Question 3 - 2017 - Paper 2

Step 1

Identify ONE cost item that can be repaid over a period of five years.

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Answer

One cost item that can be repaid over a period of five years is the 'Loan (Tractor)' listed in the budget.

Step 2

Give a reason for the answer to QUESTION 3.1.1.

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Answer

The reason is that a loan for a tractor is typically a medium-term liability, which is expected to be paid off over a timeframe, typically five years.

Step 3

Refer to the data above and calculate the highest income generated.

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Answer

To find the highest income generated, compare the two income sources:

  • Sales to the local market: R200,000
  • Sales to hostels: R120,000 The highest income generated is R200,000 from sales to the local market.

Step 4

Indicate, in the budget above, TWO problems that can be associated with this medium-term asset.

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Answer

Two problems associated with the medium-term asset (tractor loan) could include: 1) Interest rates on the loan may fluctuate, increasing financial pressure. 2) Depreciation of the tractor over time, which can reduce its value and effectiveness for the farmer.

Step 5

Use a formula to calculate the profit of this enterprise. Show ALL calculations.

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Answer

To calculate the profit, use the formula:

Profit = Total Income - Total Cost

Total Income = R320,000 Total Cost = R252,500

Calculating: Profit = R320,000 - R252,500 = R67,500

Thus, the profit of the enterprise is R67,500.

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