A Tool to Help Producers Calculate Their Costs

How do producers make money with shrinking margins, rising costs, and demanding customers? Which crops are making money, and which ones are losing money?  A simple cost accounting program distributed by Rutgers University Cooperative Extension enables producers to determine the profitability of greenhouse crops.  The newest version calculates costs of crops produced outdoors as well as greenhouse crops. New features of the Rutgers Cost Accounting Program include calculating the percentages of each overhead cost, inputting data from the balance sheet and calculating key financial ratios. In addition to analyzing actual costs, the program can be used as a planning tool to analyze the impact of increased energy costs and prices a well as changes in marketing mixes, or other changes producers are considering. The Rutgers Cost Accounting program begins by collecting information typically contained in income statements (or Schedule F) and balance sheets that is readily available to managers.  The user then enters information on direct costs of each crop. From this input, the program allocates as many costs as possible to individual crops.  The program assigns the remaining unallocated costs from the income statement to each crop on a per square-foot-week basis. The program then calculates information on costs and returns per crop, per unit (pot or flat), and per square foot for each crop, as well as an income statement showing total costs, allocated costs, and unallocated costs. In addition to analyzing their actual costs, managers can use the program as a planning tool to analyze the impact of increased energy costs and prices a well as changes in marketing mixes, or other changes they are considering in their business. Managers can use the software to analyze various strategies to improve the overall profitability of their businesses.  This can be done by entering either hypothetical crops into the program or hypothetical changes in the current production system and comparing the results to that system.  The program also can be used for student instruction in production and management classes or for extension workshops.