PARTIAL BUDGETING OF MANAGEMENT ALTERNATIVES 

 FOR FRUIT GROWERS 



Robert L. Christensen 

 Department of Food and Resource Economics 



Introduction 



Fruit growers must make many decisions o£ both a short-term or 

 long run nature. These decisions can range from those involving 

 replacement of blocks or choice of varieties (which are very long run 

 in nature) or those such as selecting a spray program, deciding on 

 the size of a picking crew and purchase of packaging materials (which 

 are short run in impact). Decisions can be of significant magnitude 

 in a monetary sense or relatively insignificant. It is obvious that 

 as the magnitude of financial committment increases, the attention 

 paid to the consequences of such a decision on profitability should 

 also increase. 



The most important function of management is the planning and 

 evaluation of the alternative courses of action that can be taken. 

 The decision-making function is the true meaning of management. 

 Thus, it is important that a manager become fully knowledgeable 

 with the concepts of costs, revenues, and profits. He also must 

 have a decision-making framework or "procedure" that he can follow 

 in developing and analyzing his data so that the profitability of a 

 course of action can be established. It should be clear that the 

 exercise is one of planning or anticipating future events. This 

 means that the manager must make some assumptions or projections with 

 regard to expected future prices, costs, yields, and the like. It 

 also means that if these projections turn out to be in error, then 

 the decision made may also be in error. Thus, the importance of 

 good information from records, farm research, or other sources 

 should be obvious. 



Budgeting as a Tool for Decision Making 



Budgeting is the pencil and paper testing of the consequences 

 of a decision before actually making it. It consists of projecting 

 the costs and returns resulting from a course of action into the 

 future and thus calculating the probable effects on net earnings. 



Since few managers will knowingly make a decision that is shown 

 to be unprofitable, it is important that a manager have the best 

 information available and that he knows how to use this information 

 to assist him in assessing the profitability of the decision. 



The technique to be described and illustrated here is that of 

 partial budgeting . It is the most easily understood and most widely 

 applicable of all of the economic decision making tools. Some of 

 the other advantages are as follows: 



