University of Maryland Extension

Variable/Operating expenses

Dale M. Johnson, Extension Specialist, Farm Management

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Variable/Operating expenses are directly tied to producing crops and livestock and usually increase or decrease proportionately to the increase or decrease in production. For example, if you decide to produce more crops, you will need to purchase more seed, fertilizer, and other crop inputs. If you produce more livestock, you will need to purchase more feed. So as you set your production goals, you should calculate the levels of inputs you need to purchase and these expenses will have to be subtracted from income to calculate profit.

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Fixed/Overhead expenses

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