Question

1. Explain why it is important for an agribusiness manager to understand production and inventory management.

2. In the basic break-even equation, the term contribution is used. What does the term contribution mean here? What does this number tell the manager?

Answer 1

1 Ans: It is important for an agribusiness manager to understand production and inventory management because:-

a). The agricultural production needs to be increased to enable high profit for agribusiness manager.

b). Inventory managment is required to safely stock the perishable items like fruits, vegetables etc.

c). The production per acre of land should increase with the help of new technology and scientific agricultural practices.

d). Inventory management also guide about safety stock which needs to be maintained to meet the damand.

2 Ans: The contribution in break-even equation can be explained as below:

a). The contribution represents the amount of money required to cover its fixed cost once it's variable cost is paid.

b). It also includes amount left after fixed cost is covered, which includes net operating profit or loss.

c). Contribution margin is given as the difference between sales revenue and variable cost. This number basically gives an idea of fixed cost and profit.

d).If fixed cost is subtracted from contribution margin, then gives the operating profit or loss.

e). Analysis of contribution margin gives an idea of operational effectiveness.