1 2 Team Assignment, Part 2
The basic role of accounting information is to help its clients in the decision­making process. Cost accounting is viewed as the way toward gathering, breaking down, summarizing, and assessing different option approaches including costs and exhorting the administration on the
most suitable strategy given the cost productivity and ability of management. Describe any factors that could skew your results.
One method of the cost that could make a product look more favourable than would be the traditional costing method can cause the product look better than it since it's more simplistic and less accurate in assigning the overhead costs. In the traditional costing method, the overhead is assigned to the product based on the predetermined overhead rate using labor hours. The indirect costs are not allocated based on activities of making the products which make the results less accurate.
In this case, the traditional costing method understates the cost associated with the
tree and overstates the margin of the trees. It makes the product margin of trees to be $75,776.48 while ABC costing calculates it as negative $2,532.98. It also calculates the cost per unit of trees
to be $4.48 while in the real sense it is $1.02. ABC costing is more accurate than the traditional costing since it gives a better a more precise breakdown of indirect costs. The ABC method assigns costs based on activities and then assigns costs to the products based on the products' usage of the activities. This method gives a more accurate result. Justify Whether Mr. Beridon Should Cut the Sod Portion of His Company. After reviewing the sod portion of the costing breakdown, Mr. Beridon should not cut the sod portion of his business if there will be expansion in the Houston area. Since the new 3 construction builders use Jeemp Farms for their supplies for the new neighbourhoods, it would be beneficial to keep the sod in place. The one thing that Mr. Beridon should keep in mind is to keep his sod prices competitive with the other local businesses so that he does not lose the new construction business. Reviewing the traditional costing the labor is lower per unit than the trees.
The sales remain higher for the sod since the production costs are lower for the sod. The highest months for the sod side of the business are during the summer and less during the winter so Mr. Beridon could budget better to cut costs and make up for the slower months. Looking at the materials, it costs $15,568.51 Mr. Beridon should see that the sod side of the business is profitable. Justify Whether Mr. Beridon Should Cut the Tree Portion of His Company Instead
After reviewing the tree portion of Jeemp Farms, Mr. Beridon does make the most money
off the trees, but it is the most expensive side of the business as well. The process for growing the trees are very timely, and manufacturing overhead is very costly ($91,612.98). The number of trees sold is lower but the growth time takes longer, and without the machinery to reduce the time growth the trees will not increase. Since Jeemp Farms can sell the trees for more money, I would see why Mr. Beridon would want to get rid of the sod side at first glance, however, with the machinery to help with the trees to increase tree growth I think this would be the only way to keep the tree side of the business. Mr. Beridon should see that without the machinery the tree side of the business is not as profitable as he originally thought and may want to look at discontinuing tress instead of sod. Describe Other Methods of Analysis You Could Use to Help You Come to a Decision
Mr. Beridon has stated that he can charge more for a tree than a foot of sod, which leads 4 him to conclude that the tree sector is more profitable than the sod sector. In addition to an ABC
system, other methods of analysis might prove beneficial in assisting him with his decision about
whether to discontinue the sod portion of the business. Differential analysis is a decision­making
technique that will enable Mr. Beridon to analyse the difference in costs and revenues between the alternatives. In this case, the alternatives are discontinuing the sector or keeping both the tree
and sod sector. Analysing the differential costs and differential revenues between both sides of the business can help in determining whether the decision to eliminate the sod sector is most cost­
effective and profitable. On the surface, it may appear that the tree sector is more profitable than
the sod sector; however, conducting a differential analysis, as well as a utilizing the ABC method
will enable Mr. Beridon to realize which alternative is best for the business. Jeemp Farm’s data reveals costs for the tree portion of the business exceed its revenue, resulting in a negative product margin. On the other hand, the sod sector is revealing a positive product margin. Further examination of the costs will assist Mr. Beridon in his decision about which sector is most profitable. Describe Any Other Qualitative or Quantitative Factor to the Business Since the analysis of Jeemp Farms, the company is selling enough of the sod. However, with the peak season of the summer months when the company is selling the most, Mr. Beridon should capitalize during this time. Furthermore, during the offseason, the company should be putting more efforts on the trees in the winter because this would be a beneficial time in this season.
Mr. Beridon may even want to invest in a better quality of sod so, the company may 5 make a profit. Even though it does not measure the quality because it would be difficult to determine the quality of the sod. However, if Mr. Beridon invests in a better quality of sod, he could charge a little more for the product. Determine Any Additional Information You Would need Before Recommendation Since there is no way to determine if the company is using any machinery however, the company would work more efficiently if there was a machine to take up the trees. Furthermore, it would be very beneficial for the sod at planting time and harvest. These would need to be determined for the company on how we need to proceed with the recommendations. Conclusion One technique for costing that could make an item look greater than it is the conventional
costing strategy can cause the item look superior to it since it's more oversimplified and less precise in appointing the overhead expenses. In the customary costing strategy, the overhead is allotted to the item given the foreordained overhead rate utilizing work hours. One strategy for costing that could make an item look greater than it is the customary costing technique can cause the item to look superior to it since it's more oversimplified and less precise in allocating the overhead expenses. In the conventional costing technique, the overhead is allocated to the item in view of the foreordained overhead rate utilizing work hours. The quantity of trees sold is lower yet the development time takes longer, and without the hardware to decrease the time development the trees won't increase. The number of trees sold is lower however the development time takes longer, and without the apparatus to diminish the time development the trees won't increase. However, with the pinnacle period of the late spring months when the organization is offering the most ought to underwrite amid this time. 6

 

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