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".

Compute the product costs for the sod and trees under traditional and ABC costing using the Microsoft® Excel® spreadsheet

# produced and sold of each product	January	February	March	April	May	June	July	August	September	October	November	December	TOTAL
St. Augustine Sod in sq feet	140,763	178256	85,948	177,005	145,800	159,626	116,407	130,832	62,790	132715	62081	164628
Texas Pecan Trees	789	987	456	456	867	680	457	667	907	789	956	897

Basic Information

Trees

Sod

Selling Price Per Unit

$                12.99

$                             0.38

Direct Materials Per Unit

$                  0.99

$                             0.01

Direct Labor Per Unit

$                  2.00

$                             0.09

Direct Labor Hours Per Unit

0.2

0.009

Estimated Annual Production and Sales

units

Estimated Overhead (last year's numbers)

Planting

47,000

Irrigation

19,000

Product Support

19,046

Harvesting

21,567

Inspections

4,564

Property Taxes

6,754

TOTAL

117,931

Estimated Total Direct Labor Hours

DO NOT ROUND

Predetermined Overhead Rate

DO NOT ROUND

Traditional Costing

Sales

Direct Materials

Direct Labor

Manufacturing Overhead

Product Margin

per unit

% of overhead costs by product	Planting	Irrigating	Product Support	Harvesting	Property Taxes	Inspections
St. Augustine Sod in sq feet	20%	20%	7%	40%	40%	10%
Texas Pecan Trees year old trees	80%	80%	93%	60%	60%	90%
Overhead costs by product	Planting	Irrigating	Product Support	Harvesting	Property Taxes	Inspections	TOTALS
St. Augustine Sod in sq feet
Texas Pecan Trees year old trees
							$                       -
Overhead
Planting	47,000
Irrigation	19,000
Product Support	19,046
Harvesting	21,567
Inspections	4,564
Property Taxes	6,754
TOTAL	117,931
ABC Costing:	Trees	Sod
Sales
Direct Materials
Direct Labor
Manufacturing Overhead
Product Margin
per unit

Estimated Overhead (last year's numbers)

Planting

47,000

Irrigation

19,000

Product Support

19,046

Harvesting

21,567

Inspections

4,564

Property Taxes

6,754

TOTAL

117,931

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.