ABSTRACT
This chapter begins by noting the typical uses of farm management oriented enterprise budgets. It indicates the particular revenue, cost and return measures that are relevant, given the use at hand. The chapter reviews the principal measurement issues relating to budget preparation. The primary uses of an enterprise budget in farm management decision-making include enterprise selection, cash flow planning, marketing, negotiating lease terms, and investment decisions. Farm managers can make sound economic decisions by selecting enterprises on the basis of greatest returns over variable cost, providing the variability of these returns is compatible with the farm's financial position and the manager's risk preferences. In computing full economic costs for an enterprise it is necessary to allocate ownership costs on assets used in multiple enterprises to individual enterprises.
