Question

Mr. Beridon received your requests for information and returned data which you have compiled in an Microsoft® Excel® spreadsheet (see document template). He also said, "We grow sod and trees at Jeemp Farms. We sell the sod mainly to home builders in the area, although we sell to some individuals who are purchasing square footages to re-sod their yard. Many home builders will purchase to sod an entire subdivision. They then may come back to us to purchase trees for the yards. It really is a package deal. For builders like that, we are a one-stop-shop. In most cases, however, we sell the trees to orchards and some individuals. The purchaser is responsible for all shipping costs related to their product."

    "Our production process is different for each product. For sod, we plant the seed, irrigate, cut, and roll the sod and then transport it. For the trees, we plant the root stock, graft the tree, water until a particular maturity and then dig it up and sell it. We inspect the plants as needed to make sure we are producing a quality product that is disease-free."

    "We have delayed purchasing some machinery that reduces time for the planting of the trees because it is a large up-front cost and we don't want to have a huge outlay of cash if our profits keep going down."

    "The grass does not require as much irrigation as the trees, as it is at a lower elevation than the tree acres and is closer to the creek; it gets a lot of the run off."

    "Historically, we have always been able to sell everything we produce. Hopefully, that will continue since Houston is expanding rapidly."

- Describe other methods of analysis you could use to help you come to a decision.

- Describe any other qualitative or quantitative factors or changes to Mr. Beridon's business might be relevant to Jeemp Farms as they make the decision as to whether to use ABC and whether to cut sectors.

Answer 1

Answer:

• In this given model the conventional technique for costing (retention costing) and ABC costing (Activity Based Costing) strategy is conveyed. The impediment of both the costing strategies are given as beneath:-
• a) Limitation of absorption Costing (Traditional Costing)
• Under this costing strategy both the cost (Fixed and variable) is utilized to decide the all-out expense. This technique totally disregards that business volume and productivity factor. Consequently, if this costing strategy is received and on the off chance that the business volume is dropped, at that point, the cost will be a lot higher and it won't be conceivable to deal the items at benefit
• b) Activity-Based Costing (ABC Costing)
• The customary technique for costing (ingestion costing) is currently days being supplanted with ABC costing approach. The procedure includes recognizing movement and dependent on the long stretches of action of every item, the expense is determined. Be that as it may, the principle restriction under this costing technique is that the expense of recognizing the expense under this strategy is high because of lead time to set up the costing sheet. Additionally, there is a likelihood that all the expenses are not caught appropriately. The hourly rate is likewise reliant upon the evaluated creation volume.
• In both the previously mentioned costing techniques, the adjustment in deals volume may affect the cost inferred through these procedures
• The elective costing technique (negligible Costing strategy) is the procedure that will give the administration a superior thought regarding the adjustment in cost for each adjustment underway volume. This will assist the administration with pricing the items appropriately. Since this procedure doesn't think about completely cost (fixed cost), the costing will be ideal under this cost technique. Be that as it may, the net benefit will stay the same.