Leighton Beridon owns Jeemp Farms, located near Weimar, TX. The farm produces pe

Question

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 chair than he can charge for 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

your team is planning on conducting an analysis of whether ABC would be beneficial to Mr. Beridon. Create a process for conducting this analysis.

1. How could you apply the data in the company general ledger?
2. Determine questions to ask Mr. Beridon.
3. Determine other information to gather.
4. Explain how this additional information could help you in your analysis?

I need specific help with numbers 3 and 4. Thank you!!!

Explanation / Answer

-Answer to part 3

Information to gather are :

- Data about direct and indirect costs

- How much work is varried out with machines like watering tress with help of automatic pumps and sprinkles

- What are the main cost drivers like labour, electricity expesnes

- What are the mian activities carried out like sowing seeds, watering etc

- Who will be respoinsible for conducting accounts on daily basis on the basis of ABC, will he be able to cope with the change

- Will the extra administrative cost be less than the incremental benifits

- What is the cost sheet of trees and sods

Answer to Part 4

This additional information can help in analysing whether firm will be able to sustain the changes led by ABCsystem, both behaviourial as well as financial. It is important to anaylyse whether changes led by ABC will be benifcial to company or not financially

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