EGEL Plus MVZ · Mexico · CENEVAL
Original practice questions written to the published syllabus · not past papersThe economics of livestock production and trade: costs, markets, cooperatives, credit, insurance, trade rules and project appraisal.
In the exams: EGEL Plus farm administration 10; NAVLE practice management (within professionalism and practice management 7%)
Mexico EGEL Plus MVZ
Farm administration (10 items): production costs, records, budgets and break-even, marketing and the economic evaluation of livestock enterprises.
How our questions for EGEL Plus MVZ spread across the units of Livestock Economics, Marketing & Business Management. Difficulty: 5 easy, 17 medium, 6 hard.
| Cost of production | 10 | |
| Project appraisal | 7 | |
| Production economics | 3 | |
| Livestock credit | 3 | |
| Farm size and scale | 2 | |
| Livestock insurance | 2 | |
| Livestock marketing | 1 |
Choose an answer, then open the working. Each explanation says why the right answer is right and why the others are not.
Green fodder costs 3 currency units per kg and concentrate 30 per kg. At the current ration, one extra kilogram of concentrate would replace 8 kg of green fodder with no change in milk yield. What should the farmer do to cut the cost of this yield?
C. Feed less concentrate and more green fodder, since the 8 kg of fodder saved is worth only 24 currency units
Least-cost rule: substitute until MRTS (kg of fodder replaced per kg of concentrate) equals the price ratio Pconc/Pfodder = 30/3 = 10. Here MRTS is 8 < 10: adding 1 kg of concentrate costs 30 currency units but saves only 8 × 3 = 24 of fodder. Moving the other way saves money until MRTS rises to 10. Comparing kilograms rather than money values is the classic error.
Livestock units (adult cattle units) are used in farm size studies to:
C. Add animals of different species and ages on a common basis
A livestock unit converts young stock, buffaloes, small ruminants and poultry to a common equivalent so herds can be compared and added. The coefficients differ between systems, so a study must state which it uses. They are not prices or genetic indices.
On a dairy farm, which of these is a fixed cost in the short run?
A. Depreciation on the cattle shed
Fixed costs do not change with output in the short run: depreciation, interest on fixed capital, rent, insurance. Concentrate, AI and casual labour rise and fall with the number of animals and the output, so they are variable.
A milking machine costing 500,000 currency units is depreciated by the diminishing balance method at 20 per cent a year. What depreciation is charged in year 3?
C. 64,000 currency units
Book value: start of year 1 500,000 currency units (charge 100,000); start of year 2 400,000 currency units (charge 80,000); start of year 3 320,000 currency units, charge 20% = 64,000. 100,000 currency units and 80,000 are the year 1 and year 2 charges; 51,200 currency units is year 4's.
A broiler batch starts with 1,000 chicks at 40 currency units each. Mortality is 4 per cent and survivors are sold at 2.2 kg live weight. FCR is 1.7 on the weight sold, feed costs 38 currency units per kg, other variable costs are 15,000 and the batch's share of fixed costs is 12,000. What is the cost per kg live weight?
D. 96.32 currency units
Birds sold = 960; live weight = 960 × 2.2 = 2,112 kg; feed = 2,112 × 1.7 = 3,590.4 kg × 38 currency units = 136,435. Total = 40,000 + 136,435 + 15,000 + 12,000 = 203,435 currency units; ÷ 2,112 kg = 96.32 currency units. 99.02 currency units applies the FCR to 1,000 birds that never all reached sale; 211.91 currency units is cost per bird, not per kg; 90.64 currency units leaves out fixed costs.
A dairy project has 165,000 currency units a year available for debt service (profit after tax plus depreciation plus term-loan interest). The annual loan instalment of principal plus interest is 131,899 currency units. What is the debt service coverage ratio?
A. 1.25
DSCR = cash available for debt service / instalment due = 165,000 / 131,899 = 1.25. 0.80 inverts the ratio; 1.65 divides by principal only (100,000 currency units); 3.30 divides by one year's interest (50,000 currency units).
When an insured cow dies, which document from the veterinarian is central to settling the claim?
B. A post-mortem report stating the cause of death, matched to the animal's identification tag
Claims require proof that the insured animal died of an insured cause: the post-mortem report and the identification tag tie the death to the policy. Vaccination and breeding records may support the file but do not prove the cause of death.
A dairy project costs 1,000,000 currency units now and yields net cash flows of 200,000, 300,000, 320,000, 320,000 and 320,000 in years 1 to 5, plus a salvage value of 150,000 at the end of year 5. What is its NPV at a 12 per cent discount rate?
C. 115,556 currency units
PV = 200,000/1.12 + 300,000/1.12² + 320,000/1.12³ + 320,000/1.12⁴ + 470,000/1.12⁵ = 1,115,556 currency units; NPV = PV − 1,000,000 = 115,556 currency units. 610,000 currency units is the undiscounted surplus; 30,442 currency units leaves out the salvage value; 1,115,556 currency units forgets to subtract the investment.
What is the present value of 100,000 currency units to be received in three years if the discount rate is 10 per cent a year?
A. 75,131 currency units
PV = 100,000 / 1.1³ = 100,000 × 0.7513 = 75,131 currency units. 70,000 currency units subtracts simple interest; 76,923 currency units divides by 1.3 (simple interest); 133,100 currency units is the compounded future value, not the present value.
Why is the payback period a weak criterion for appraising a livestock project?
A. It ignores the time value of money and every cash flow after the investment is recovered
Payback counts years to recover the investment with undiscounted cash, so it ignores timing within that period and all later returns, penalising long-gestation livestock projects. It uses no discount rate, works with unequal flows by cumulation, and often agrees with NPV.
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