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GREENHOUSE COST MANAGEMENT Dr. Robin G. Brumfield RCE Specialist in Farm Management Sponsors Risk Education CSREES/USDA Northeast Risk Management Center Rutgers Cooperative Extension Office of Continuing Professional Education Green Industry One of the fastest growing ag sectors

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greenhouse cost management

GREENHOUSE COST MANAGEMENT

Dr. Robin G. Brumfield

RCE Specialist in Farm Management

sponsors
Sponsors
  • Risk Education CSREES/USDA Northeast Risk Management Center
  • Rutgers Cooperative Extension
  • Office of Continuing Professional Education
green industry
Green Industry
  • One of the fastest growing ag sectors
  • 2nd largest sector after crops
  • Most important sector in 5 states including NJ
  • Consists of floriculture and nursery
  • Nursery gross receipts were down in 2001, but floriculture still increased
challenges to the industry
Challenges to the Industry
  • Public concern about chemicals & water pollution
  • Stalled economy
  • Shift to a mature market
  • New regulations
  • Labor
  • Market segmentation
  • Rising costs, but flat prices
  • Changing technology
financial management is critical to success in
Financial Management is Critical to Success in:
  • Budgeting
  • Managing Cash Flow
  • Controlling Credit
  • Pricing
  • Obtaining Capital
  • Profitability
  • Planning
objectives
OBJECTIVES
  • Identify items with low cost = Comparative Advantage
  • Identify items with high cost - Reduce them!
costs vary from grower to grower because of
Costs Vary From Grower to Grower Because of:
  • Size of operation
  • Location
  • Managerial practices
  • Time of year
  • Market channel
  • Volume of production
costs vary from grower to grower because
Costs Vary From Grower to Grower Because
  • Other options for greenhouse space
  • Size of permanent crew
  • Availability of part-time labor
  • Type of heating system
  • Greenhouse layout
  • How quickly you pay suppliers
everyone s costs are different

Everyone’s Costs are Different!

Calculate Your Costs for Your Firm!

tools for cost accounting
Tools for Cost Accounting
  • Income Statement
  • Spreadsheet
overhead costs
Overhead Costs
  • Also called Fixed Costs
  • Total overhead costs remain constant as production increases
  • Costs per unit decrease as more units are produced
overhead costs13
Salaries

Depreciation

Interest

Repairs

Taxes

Insurance

Land Rental

Contributions

Heat

Advertising

Dues & Subscriptions

Travel & Ent.

Office Expenses

Professional Fees

Bad Debt

Overhead Costs
income statement 20 000 square foot double poly
Income Statement (20,000 square foot double poly)
  • Directs costs
    • Seeds, cutting, or plant $ 19,092
    • Pots or containers $ 9,490
    • Growing medium $ 9,150
    • Fertilizer and chemicals $ 1,130
    • Tags $ 3,788
salaries and wages
Salaries and Wages
  • Overhead salaries

(including benefits) $ 37,384

  • General wages

(including benefits) $ 12,111

utilities
Utilities
  • Heating fuel $ 20,000
  • Electricity $ 3,350
  • Telephone $ 1,480
overhead
Overhead
  • Depreciation $ 16,750
  • Interest $ 16,800
  • Repairs $ 3,725
  • Taxes $ 550
  • Insurance $ 3,240
  • Advertising $ 485
  • Dues and subscriptions $ 100
overhead continued
Overhead (continued)
  • Travel and entertainment $ 345
  • Office expense $ 314
  • Professional fees $ 550
  • Truck expense & eq. rental $ 7,150
  • Land rental $ 2,000
  • Contributions $ 18
  • Bad debts $ 925
  • Miscellaneous $ 550
space utilization
Space Utilization
  • Greenhouse area 20,000 (ft²)
  • Space used for production 75%
  • Weeks in operation 29 weeks
variable costs
Variable Costs
  • Variable Costs
  • Also called Direct Costs
  • Total variable costs increase as production increases
  • Cost per unit is constant
variable costs23
Variable Costs
  • Material costs
    • Flats
    • Inserts
    • Seedlings
    • Media
    • Labels
    • Chemicals
  • Production labor
petunia production
Petunia Production

Number of units started 5,000

Square feet per unit 1.64

Weeks to grow 8

Percent sold 98%

Sales price $6.50

variable costs of petunia production
Variable Costs of Petunia Production

Cost Crop Flat

Labor $3,385 $0.68

Seeds 1,320 0.41

Containers 2,900 0.68

Growing media 2,750 0.25

Fertilizer & Chemicals 155 0.03

Tags 823 0.16

steps to determine costs per unit
Steps to determine costs per unit
  • Enter Direct Costs
  • Program will allocate these to each crop
  • Other costs will be treated as Overhead Costs
  • Overhead cost is $0.267 per sq. ft.-wk.
firm xyz production schedule
Firm XYZ Production Schedule

Item Petunia Marigold Geranium Geranium Pointsettias

Flats Flats Flats 4-inch 6-inch

No. of units 5,000 3,000 5000 10,000 15,000

Sq. ft./unit 1.64 1.64 1.64 0.11 1.00

Weeks 8 6 13 6 15

% sold 98% 98% 98% 95% 95%

Price $6.50 $6.50 $10.00 $1.20 $5.00

firm xyz costs
Firm XYZ Costs

Item Petunia Marigold Geranium Geranium Pointsettias

Flats Flats Flats 4-inch 6-inch

Sales $31,850 $19,110 $49,000 $11,400 $71,250

Profit/crop $2,998 $4,430 $2,519 $4,790 ($2,605)

Profit/unit $0.61 $1.51 $0.51 $0.50 ($0.18)

Profit/sq.ft. $0.05 $0.15 $0.02 $0.73 ($0.01)

Sq.ft.-wk

Price $6.50 $6.50 $10.00 $1.20 $5.00

greenhouse cost accounting program
Greenhouse Cost Accounting Program
  • Requires Microsoft Excel
  • Contact :Dr. Robin Brumfield

Brumfield@aesop.rutgers.edu

costs
Costs :
  • Are grower specific.
  • Vary with production and marketing decisions.
  • Vary with
    • Market conditions
    • Labor supply
    • Age & condition of greenhouse
    • Managerial skill.
  • Should be calculated for your firm!