Problem
Mr. Beridon received your requests for information and returned data which you have compiled in an Microsoft Excel spreadsheet. 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".
Compute the product costs for the sod and trees under traditional and ABC costing using the Microsoft® Excel® spreadsheet.
Write a 700- to 1,050-word paper analyzing Jeemp Farms and what data and information you will consider.
Include the following:
Describe any factors that could skew your results. In other words, explain if there is one method of costing that could make a product look more favorable than it really is.
Justify whether Mr. Beridon should cut the sod portion of his company.
Justify whether Mr. Beridon should cut the tree portion of his company instead.
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 that might be relevant to Jeemp Farms as they make the decision as to whether to use ABC and whether to cut sectors.
Determine any additional information you would need to have before making a recommendation.
My question is in regard the first bullet point
Describe any factors that could skew your results. In other words, explain if there is one method of costing that could make a product look more favorable than it really is.