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Describe the steps followed in procedure for determining gross margin analysis in firm accounts.

      

Describe the steps followed in procedure for determining gross margin analysis in firm accounts.

  

Answers

Jim
a)Step 1:Determine the enterprise on the farm for which gross margin calculation should be made, define each enterprise output, and input requirements on per unit area (hectares or acres).
b)Step 2:Check all available records for accuracy, consistency and completeness. Ensure that complete records on each enterprise, activity and production system are available.
c)Step 3:State all appropriate assumptions for each enterprise, defining all conditions in which each enterprise is produced, consumed and marketed. These assumptions should include production systems, input prices, seasonal changes, market prices, yields, and systems of measures.
d)Step 4:Determine alliteratively all the labor input requirements for every activity under the given production system. Define the labor inputs per unit area in terms of man-hours or man-days.
e)Step 5:Determine alliteratively all other variable input requirements for each activity and overall production period under the given production system. Make detailed valuation of all variable inputs to allow calculations for these activities.
f)Step 6: Determine all costs for variable inputs including hired or contract labor but excluding cost on permanent labor and fixed inputs.
g)Step 7:Determine sub-totals for each activity and grand totals for the enterprise for labor inputs, variable inputs, input costs.
h)Step 8:Determine the results for the gross margin:
-Based on the yields and prices per unit, as stated in your assumption, and calculate the “gross return” (GR)
-Based on the variable costs per activity per unit area, add up all subtotals to obtain the total variable costs.
-Subtract the total variable costs from the gross return to obtain Gross margin so, Gross margin/unit area = (GR –TVC).
i)Step 9:Determine the return to labor: achieved by dividing Gross margin by total labor input.Which is represented as returns per unit of labor.

jim items answered the question on October 23, 2018 at 09:57

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