-7- 



Before Removal of 

 5-Acre Block of 

 Oldest Trees 



After Removing 

 5-Acre Block of 

 Oldest Trees 



Total Sales 



2000 bushels less 



Reduced Somewhat 



Changed very little 



$24,135. 



The adverse effect of such a change on Income results from the fact that 



"fixed costs" or "overhead" items are affected very little and variable costs 



are not reduced proportionately to the reduction of income from lowered pro- 

 duction. 



In planning a change a budget such as the above will indicate the effect 

 on income of a shift in operations affecting income. 



In general, changes in production that result in lowered production require 

 new production or a reduction in fixed costs. Fixed cost reductions are usually 

 rather difficult on a fruit farm. Since most farms acquire fixed costs over 

 time, on fruit farms a tree replacement program geared to prospective tree 

 removal is an important part of farm management. 



The suggestion was made that 150 trees be removed on a selective basis 

 within the blocks on basis of yield. The total crop reduction was estimated 

 at 1000 bushels. A partial budget was used to estimate the effect on net 

 income; balancing items which would increase income; that is, benefits against 

 items that would decrease income, detriments with the following result. 



The effect on annual net income of the orchard if 150 low producing trees 

 are removed: 



