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Read the following scenario below:
Leighton Beridon owns “Jeemp Farms”, located near Weimar, TX. The farm produces pecan trees and sod. He has so many orders from the Houston metropolitan area that he is able to sell all his inventory each year, but he is not netting as much as he has in past years. His daughter, Liesl Beridon, came home from college over Thanksgiving and mentioned ABC costing, which she learned about in her cost accounting class. Mr. Beridon does not really know what ABC costing is and is skeptical as to whether it would be right for his business. He has hired your company to educate him about ABC and whether or not he should use an ABC system. Over the next few weeks, you will work towards helping Mr. Beridon decide what is the best route for his company to take.
Shortly after you get started, Mr. Beridon sends you an email stating that he feels he needs to discontinue the sod portion of his business and focus on his tree sector, as he can charge more per tree than he can charge for a foot of sod. He sends you an email stating, “I can charge so much more for a tree than a foot of grass. Therefore, I am planning on discontinuing the sod portion of the business immediately as I make so much more on the trees! I am going to plant all my sod acres with trees”.
Write a 700- to 1,050-word paper plan for your boss explaining how you will analyze Jeemp Farms.
Include the following:
Prepare an argument convincing him to hold off on his decision and see the results of your analysis first. As you have not had time to do any analysis yet, you need to convince Mr. Beridon to wait on whether to discontinue his sod business.
Project potential benefits Mr. Beridon could gain from using an ABC system.
Explain how ABC creates these benefits.
Your team is planning on conducting an analysis of whether ABC would be beneficial to Mr. Beridon. Create a process for conducting this analysis.
Include the following:
How could you apply the data in the company’s general ledger?
Determine questions to ask Mr. Beridon.
Determine other information to gather.
Explain how this additional information could help you in your analysis?
Explain how you would decide on a final recommendation.