For a soybean enterprise with fixed costs of $50 per acre, total variable costs of $4.00 per bushel, and expected yield of 50 bushels per acre, the break-even price per bushel is

For a soybean enterprise with fixed costs of $50 per acre, total variable costs of $4.00 per bushel, and expected yield of 50 bushels per acre, the break-even price per bushel is

• A. $4.00
• B. $5.00
• C. $6.00
• D. $7.00

Answer: (B)

To break even per bushel, you must cover all costs allocated to each acre. That means adding fixed costs per acre to the total variable costs per acre and then dividing by the expected yield. Fixed costs per acre: 50 Variable costs per bushel: 4, with 50 bushels per acre → variable costs per acre = 4 × 50 = 200 Total costs per acre = 50 + 200 = 250 Break-even price per bushel = total costs per acre ÷ yield per acre = 250 ÷ 50 = 5 So, the break-even price is $5 per bushel. At this price, the contribution margin is price minus variable cost per bushel (5 − 4 = 1) times 50 bushels = 50, which just covers the fixed costs. If the price rises above 5, you start to earn a profit; if it falls below 5, you incur a loss.

To break even per bushel, you must cover all costs allocated to each acre. That means adding fixed costs per acre to the total variable costs per acre and then dividing by the expected yield.

Fixed costs per acre: 50

Variable costs per bushel: 4, with 50 bushels per acre → variable costs per acre = 4 × 50 = 200

Total costs per acre = 50 + 200 = 250

Break-even price per bushel = total costs per acre ÷ yield per acre = 250 ÷ 50 = 5

So, the break-even price is $5 per bushel. At this price, the contribution margin is price minus variable cost per bushel (5 − 4 = 1) times 50 bushels = 50, which just covers the fixed costs. If the price rises above 5, you start to earn a profit; if it falls below 5, you incur a loss.