Enterprise Area / ha Total revenue / $ Seed cost / $ Fertiliser cost / $ Pesticide cost / $ Labour cost / $ Total variable costs / $ Maize 3.0 2400 180 350 ...

(a) Gross margin is the total revenue from an enterprise minus the total variable costs. [1] It measures the profit contribution of an enterprise before fixed costs (such as rent or permanent labour) are deducted, making it useful for comparing the relative profitability of different crop or livestock enterprises on a farm.

(b) Calculating the gross margin for the maize enterprise:

Total revenue for maize = $2400

Total variable costs for maize = $950

\[ \text{Gross margin} = \text{Total revenue} - \text{Total variable costs} = 2400 - 950 = \$1450 \] [2]

(c) The enterprise with the highest gross margin:

First, calculate all three gross margins:

The tomato enterprise gave the highest gross margin at $1680. [1]

However, the farmer might not switch all land to tomatoes because tomatoes are highly perishable and require reliable market access and rapid transport to sell before they spoil. [1] Growing a larger volume than the local market can absorb would result in unsold, wasted produce. Additionally, tomatoes carry higher risk (pest and disease pressure, weather sensitivity) and require more intensive labour and management than maize.

(d) Two ways the farmer could reduce variable costs of the groundnut enterprise:

1. Use farm-saved seed instead of purchasing new seed each season. [1] Groundnuts produce viable seed that can be retained from the harvest, reducing the $220 seed cost significantly.
2. Apply farmyard manure from livestock on the farm instead of buying commercial fertiliser. [1] Since this is a mixed farm, animal manure is readily available and can partially or fully replace the $280 fertiliser expenditure while also improving soil structure.