Transcript AOM-4

Produce preparation costs
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Cleaning, such as removing soil and foreign
matter
Trimming, to remove unwanted leaves, stems
or roots
Grading, to separate produce into similar
sizes and quality
- time cost
- higher costs can be expected to result in
higher returns
Packaging costs
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It provides a convenient way of
handling and transporting the produce
It provides protection for the produce
It can be used to divide the produce
into convenient units for retail sale
- different functionaries may use
different type of packaging
example
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Assume that oranges are packed 20 kg at a
time in wooden boxes which, with occasional
repairs, can be used for 10 trips. A box costs
Rs. 10, repairs and cleaning during its life
costs Rs. 2 and each time the box is
transported back empty to the producing area
costs Rs. 1.
What will be the packaging cost per kg of
orange?
Handling costs
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Farmer or labourer loads produce on to cart
Labourers unloads produce at assembly market and it
is weighed
Wholesaler or his employees repackages the produce
in wholesaler’s containers
Produce is carried to and loaded on wholesaler’s
truck
Produce is unloaded at wholesale market and
weighed
Produce is repacked in retailer’s containers
Produce is unloaded at retailer’s store
Transport costs
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Assume that there are 40 meter cube of
space available in the truck to be used
for transporting tomatoes and that it
costs Rs. 500 to hire the truck. A
container of 0.2 meter cube holds 8 kg
of tomatoes.
What will be the transport cost per kg
of tomato?
Product losses - quantity
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Assume that, 10 percent loss occurs in
marketing of tomatoes to the trader. The
trader buys tomatoes from the farmer at Rs.
5 per kg and marketing costs are Rs. 2 per kg
for the tomatoes originally purchased. The
selling price of tomatoes is Rs. 8 per kg.
What will be the costs, revenue and margin
of trader per kg of tomato?
Product losses - quality
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Assume an example involving a consignment
of 100 kg of tomatoes as follows:
- 50 kg sold at Rs 2.00
- 20 kg sold at Rs. 1.40
- 20 kg sold at Rs. 1.00
- 5 kg sold at Rs. 0.40
- 5 kg can not be sold due to very poor
quality
Calculate the average selling price of tomato?
Storage costs
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Assume that a warehouse is hired for 120
days of the year at a total cost of Rs. 60000
for storing 250 bags of potatoes, each
containing 100 kg of potatoes.
The present market price of potato is Rs. 5
per kg and the bank interest rate is 10
percent per year.
Calculate the cost of storage?
Market Margin
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Price spread/ Market margin:
Price paid by consumer – price received by
the producer
- Marketing cost
- Profits of various market functionaries
Producer’s Price:
PP = price received by farmer – marketing
cost incurred by farmer
Producer’s Share in Consumer’s Rupee:
(PP/PC)*100
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Marketing Margin of a Middleman:
MMM = sale price - purchase price cost incurred by middleman
Marketing Cost:
MC = Marketing cost incurred by farmer
+ Marketing cost of all middlemen
Market efficiency
Particulars
A
B
C
Consumer price
1000
1000
1000
Marketing costs
300
500
300
Margin of intermediaries
200
100
400
Price received by farmers 500
400
300
Value addition
600
700
Market efficiency
500