2000 CHRISTMAS TREE PRODUCTION BUDGET 1
Scotch and White Pine
Hand Planted - 10 year Rotation 2
Retail Sales - Ready Cut
  ITEM     YEAR      
YOUR
          1 2 3 4 5 6 7 8 9 10 TOTAL   BUDGET
Christmas Trees (percent  sold) 3 10% 25% 35% 30% 100%
INCOME - RETAIL
Christmas Trees 1,500 3,750 5,250 4,500 15,000  
600 trees sold over entire rotation
 $  25 per tree 1000 1000 850 775 700 700 700 700 700 699
VARIABLE  COSTS
Seedlings 4 300 45 345  
Fertilizer 30 30  
Herbicides 60 60 60 40 40 40 40 40 40 40 240  
Insecticides 20 30 40 50 50 50 50 50 290  
Shearing 5 106 97 175 175 175 175 175 175 1050  
Hired Labor 378 243 81 81 81 81 81 81 81 81 1,269  
Fuel, Oil, Grease 13 12 11 11 11 11 11 11 11 11 113  
Machinery Repairs 6 5 5 5 5 5 5 5 5 5 51  
Harvesting 6 90 225 315 270 900  
Miscellaneous 7 15 15 15 15 15 15 15 15 15 15 150  
Interest on Oper. Cap. 72 34 27 25 33 34 42 54 62 58 442    
TOTAL VARIABLE COSTS 874 414 325 304 400 411 509 656 754 705 4880  
FIXED COSTS
Operator Labor Charge 8 75 75 45 45 60 60 75 75 60 60 630  
Mach. And Equip. Charge 9 31 31 31 31 31 31 31 31 31 31 310  
Land Charge 85 85 85 85 85 85 85 85 85 85 850  
Liability Insurance 10 75 75 75 75 75 75 75 75 75 75 750  
Management Charge 11 50 50 50 50 50 50 75 188 263 225 1050    
TOTAL FIXED COSTS 316 316 286 286 301 301 341 454 514 476 3590  
TOTAL COSTS 1190 730 611 590 701 712 850 1110 1268 1181 8470  
RETURN ABOVE VARIABLE COSTS -874 -414 -325 -304 -400 -411 991 3094 4496 3795 10120  
RETURN OVER TOTAL COSTS -1190 -730 -611 -590 -701 -712 650 2640 3982 3319 6530  
PRESENT VALUE RETURNS 12 -1190 -664 -505 -443 -479 -442 367 1355 1858 1408 1264
                                   
1 No charges for marketing are included due to the wide range of marketing situations found in Ohio.  However, marketing costs should be added
to your budget.  These costs should include the labor, advertising, supplies, and facilities used in the marketing of the trees.
Marketing costs may be minimal up to $5/tree in operations with an extensive marketing program.
2 No costs are included for reclamation of the ground after the final year of the Christmas Tree stand.  Reclamation may be necessary depending
upon the future use of the ground.
3 1000 trees originally planted, 600 harvested, 400 trees died or were not suitable for sale
4 1000 seedlings planted first year, 150 re-planted second year.  Cost per seedling= $0.30.
5 Shearing costs= $0.125/tree year 3 and 4, $0.25/tree following years.
6 Harvesting includes cutting, baling, transporting to loading area, and loading on vehicle.  Retail harvesting cost = $1.50/tree. 
Harvesting costs may be $0 if operation is "cut your own".
7 Includes small tools, soil tests, etc…
8 Labor Charged at $9.00/hour. It is the labor required of the operator to manage the operation.
Does not include harvesting, marketing or shearing.  See table below for labor requirements.
9 Includes depreciation, interest, and insurance costs.
10 Liability insurance included for retail operations.  Premium estimated at $375/year/site.  Cost spread out over an assumed
five acres of production.  Example:  $375/site ) 5 acres = $75.
11 Management charge= 5% of sales
Labor Requirements (hours)
Year
Hourly Charge = $9.00 /hour 1 2 3 4 5 6 7 8 9 10 TOTAL
Hired Labor 42 27 9 9 9 9 9 9 9 9 141
Operator Labor (Management) 10 10 6 6 8 8 10 10 8 8 84
                                   
12 Returns Over Life of Stand and Time Value of Money
Since a Christmas tree operation occurs over as many as ten years, it is important to examine the time value of money associated with the enterprise.  Time value of money is based on the premise that $1 today (present value) is worth more than $1 in the future.  This is basically because the $1 today can be invested and appreciate in value until some time in the future. Therefore in regards to the Christmas tree enterprise, $1 of return in year one would be worth more than $1 of return in year ten.  Returns in future years need to be discounted to reflect the time value of money.  The following table lists the returns and present value of returns from the enterprise.
Returns Over Total Costs Present Value Discount Rate  = 10%
Year 1 -$1,190 -$1,190 The discount rate is the degree to which the future values are discounted to reflect current values.  It is generally assumed to be equivalent to the  amount you could earn in alternative investment opportunities.
1 Year 2 -$730 -$664
2 Year 3 -$611 -$505
3 Year 4 -$590 -$443
4 Year 5 -$701 -$479
5 Year 6 -$712 -$442
6 Year 7 $650 $367
7 Year 8 $2,640 $1,355
8 Year 9 $3,982 $1,858
9 Year 10 $3,319 $1,408
TOTAL $6,057 $1,264
Over the life of the tree stand, the enterprise will generate $6,057 in returns.  However, since much of the return comes in future years, it is not the same as having $6,057 in the operator's pocket today.  The present value column indicates that if the operator was given the equivalent return in one lump sum today (present value), it would be worth $1,264. The difference of the total returns and the present value returns is a result of the time value of money.