The budget layouts should help ensure that all costs are included. Costs often are difficult to estimate in budget preparation because they are numerous and variable. Major subheadings in the budgets include receipts, variable costs, fixed costs, total costs, and net returns to management. Receipts are the gross returns from production. Because yields and prices are so variable, growers should use representative values for their operation.
Variable costs are costs that vary depending on the level of production.
These include inputs such as fertilizer, herbicides, insecticides, fungicides, and labor. Commercial fertilizers were used as the fertility source in all the budgets. Other variable costs might include crop management services, crop insurance, marketing, and storage. Fixed costs are costs that do not vary by level of production and are incurred by virtue of owning assets such as machinery and land. Depreciation and taxes are examples.