Clearly, the risk of introducing a disease into the herd is increased when the heifers are temporarily off the farm and perhaps commingled with other animals. Finally, the grower must realize a profit to remain in business and that profit margin represents a cost to the dairy farmer. It is inappropriate to generalize about whether raising or contracting heifers is best. The partial budget is perhaps the best tool for conducting this type of analysis. With this approach, only those cost and return variables that will change as a result of contracting rather than raising heifers are considered.
Credits represent profit-increasing items categorized as either added returns or reduced costs.
Debits include profit-reducing items classified as added costs or reduced returns. The opposite conclusion should be drawn if debits exceed credits. No fee is charged for heifers that die while in the grower's possession. It is anticipated that there will be no change in the death rate. A budget analysis of the example appears in the accompanying table.