Managerial Accounting: John Deere Component Works
John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.
Q1. How did the competitive environment change for John Deere Company between the 1970 and 1980?
• Sales increased through 1982 but then started to decline.
• Deer adjusted its level of operations downward, cut costs where possible, increased emphasis on pushing decision making downward and restructured manufacturing processes.
• Deere took floor space out of production, reduced personnel by 38.5% (right-sizing), encouraged early retirements, and did not replace most of those who left.
• To improve their operations and to make a more efficient flow through production they separated three subdivisions: Hydraulics, Drive- Train Division, & Gear and Special Products division.
• The collapse of farmland values and commodity prices in the 1980's increased the competition.
• The high dollar reduced US Exports, therefore hurting both American farming and American Farming manufacturer producers.
Q2. What caused the existing cost system to fail in the 1980's? What are symptoms of Cost System Failure?
• The fact that John Deere had previously been using a Standa...
... middle of paper ...
...rice and also selling it to others at a price that just barely covers my direct costs. I wouldn’t like to assume that an accountant's allocation of costs into categories (e.g. overhead and direct costs) matches the categories that I’d want in order to make economic decisions.
In the John Deere case, they were calling a lot of things overhead that weren't truly overhead (e.g. scrap, which is probably proportional to the amount produced). We discussed with my group how the internal transfer pricing arrangement probably encouraged the managers to think this way, since it awarded contracts on the basis of direct costs but, by the books, the actual transfer price was supposed to be the full price. In summary, the John Deere case was an exercise in thinking about how not to make pricing decisions.
The changes in American agriculture was molded by three key factors, economic change, government policy and technology, in the period of 1865-1900.Technology helped facilitated production of good as well as their transportation. Farmers were able to produce more goods, yet they overproduced and it resulted in economic hardship for them. They could not afford to export goods through the rail roads high rates, and led to clashing with the government, for the lack of support. Such factors resulted in change of American agriculture.
WMC’s accounting practices incorrectly attribute fixed manufacturing costs to the three Detroit groups in a proportional manner, leading to Group 3’s lack of profitability. Discontinuation of Group 3 pushes a greater percentage of the fixed costs to the other groups impacting their ability to be profitable. Additionally, WMC does not consider the degree to which production at the Detroit plant contributes to the operations and profitability of the other plants. Presently, each plant is accounted for individually. WMC should reevaluate and consider the...
Farmers everywhere in the United States during the late nineteenth century had valid reasons to complaint against the economy because the farmers were constantly being taken advantage of by the railroad companies and banks. All farmers faced similar problems and for one thing, farmers were starting to become a minority within the American society. In the late nineteenth century, industrialization was in the spotlight creating big businesses and capitals. The success of industrialization put agriculture and farmers on the down low, allowing the corporations to overtake the farmers. Since the government itself; such as the Republican Party was also pro-business during this time, they could have cared less about the farmers.
The farmers of the late 1800s had many reasons for being dissatisfied with their situation. Unfair railroad practices, such as rebates and drawbacks, hurt them severely. Even common issues of shortage of money, drought, and mortgages were all issues that hurt farmers economically. The farmers of the period, though, used these issues to change the shape of American politics.
The Roaring Twenties approached and the citizens in Colorado were facing rough times. In 1920, many people such as farm owners, manufacturers, and even miners were having a hard time making a living due to an economic downfall. The farmers especially, where facing the toughest of times. The price of various farm-grown goods like wheat, sugar beets, and even cattle was dropping because their goods were no longer needed by the public. Wheat had dropped in price from $2.02 in 1918 to $0.76 by the time 1921 came around. Sadly, the land that they were using to grow wheat became dry and many farmers had to learn to grow through “dryland farming” which became very popular in the eastern plains from 1910 to 1930 (Hard Times: 1920 - 1940). Apple trees began to die due to the lack of desire for apples, poor land, and decreased prices. Over the course of World War I, the prices of farm goods began to increase slowly. Farmers were not the only one facing this economic hardship while others in big cities were enjoying the Roaring Twenties.
When driving around the country, one sees hundreds and thousands of acres either planted or tilled. Sometimes one might wonder… “Who would be smart enough to think of something that can plant and till this land?” Also, who is the person that thought of pulling it behind an implement of that complexity? John Deere, the man, and the business, started out in Rutland, Vermont in 1804, He left a legacy that would change agriculture forever. When John Deere crafted his famous steel plow in his blacksmith shop in 1837, he also forged the beginning of Deere & Company “John”.
...y or other heavy equipments. There was a significant decline in exports in these states which was followed by the collapse of their currency and this made it difficult for these states to obtain credit (Engerman 208).Significant reduction in agricultural production across the state resulted in scarcity of agricultural commodities which in turn increased the prices of agricultural products as well as export surpluses.
Between 1865 and 1900 technology, economic conditions, and government policy influenced American Agriculture greater than it ever had before. Technologically, Railroads, factories, and farm equipment changed American agriculture by allowing the production of farmed goods to be increased substantially, while economic conditions caused the prices of these goods to go down and then fluctuate. Farmers hurting from the economic disarray began influencing the laws being passed to help them in their economic troubles. Because of the influence of technology, government policy, and economic conditions between the 1865 and 1900 American agriculture was affected.
Evidently, during the 1870-1900 period, farmers expressed drastic discontent in which their attitudes and actions had a major impact on national politics. First and foremost, farmers began to feel that their lives were threatened by competition with railroads, monopolies, trusts, currency circulation shortage, and the desire for Mother Nature to destroy their crops. The majority of the people of America were slaves, and monopoly was the master (Document C). Monopolies were dictating the way the agricultural industry functioned as a whole. Additionally, the deflation of prices was particularly crucial, because it put the farmers in a high state of debt. Furthermore, competition was another major contributing factor liable for the farmers’ dissatisfaction.
The period between 1880 and 1900 was a boom time for American Politics. The country was finally free of the threat of war, and many of its citizens were living comfortably. However, as these two decades went by, the American farmer found it harder and harder to live comfortably. Crops such as cotton and wheat, once the sustenance of the agriculture industry, were selling at prices so low that it was nearly impossible for farmers to make a profit off them. Furthermore, improvement in transportation allowed foreign competition to materialize, making it harder for American farmers to dispose of surplus crop. Mother Nature was also showing no mercy with grasshoppers, floods, and major droughts that led to a downward spiral of business that devastated many of the nation’s farmers. As a result of the agricultural depression, numerous farms groups, most notably the Populist Party, arose to fight what the farmers saw as the reasons for the decline in agriculture. During the final twenty years of the nineteenth century, many farmers in the United States saw monopolies and trusts, railroads, and money shortages and the loss in value of silver as threats to their way of life, all of which could be recognized as valid complaints.
The company operates on a profit and non-profit basis for community organizations, amongst special factory price payments with distinctive dealer pricing (Leslie, 2014). In order to be eligible show proof of your charitable non-profit status, and the dealer will assist you in selecting the right equipment for the task, which will then provide special pricing for your organization. John Deere 's mission is to "Double and Double Again the John Deere Experience of Genuine Value for Employees, Customers, and Shareholders." This will be accomplished by rapidly expanding global customer coverage on the farm site, worksite, home site, and turf site by being first in creating smart and innovative customer solutions through machines, service, and concepts. The company 's business strategies of Running Smart, Running Fast, and Running Lean will help John Deere achieve its mission (Leslie,
Another effect of the stock market crash was due to the Agricultural recession. In the year of 1929, the American Agricultural sector was struggling to maintain its profitability. To explain, many “many small farmer were driven out of the business because they could not keep up with the new economic” (Pettinger). The reason this occurred was due to better technology
Even though a myriad of tools and techniques learnt in the Strategic Cost Management and Strategic Business Analysis courses are not fully exploited in this essay, it is generally recognised that those techniques are useful for a corporate to formulate strategy, do strategic planning, control costing and quality, as well as eventually elevate its values, regardless the nature and size of organizations.
Most of the reasons concerning agrarian discontent in the late nineteenth century stem from supposed threats posed by monopolies and trusts, railroads, money shortages and the demonetization of silver, though in many cases their complaints were not valid. The American farmer at this time already had his fair share of problems, perhaps even perceived as unfair in regards to the success industrialized businessmen were experiencing. Nevertheless, crops such as cotton and wheat, which were once the staples of an agricultural society, were selling at such low prices that it was nearly impossible for farmers to make a profit off them, especially since some had invested a great deal of money in modern equipment that would allow them to produce twice as many goods. Furthermore, improvements in transportation allowed foreign competition to emerge, making it harder for American Farmers to not only dispose of surplus crop, but to transport crops period. Finally, years of drought in the Midwest and the degeneration of business in the 1890's devastated many of the nation's farmers, and as a result of this agricultural depression' many farm groups, most notably the Populist Party, arose to fight what farmers saw as the reasons for the decline of agriculture.
John Deere’s ability to operate profitably throughout their business cycle has been through proper supply chain management, rigorous cost controls, and lean productivity John Deere shows ambition towards future sustainment with agricultural equipment solutions and a larger global presence in their construction equipment product line. While agriculture equipment has gotten more powerful and larger than original designs, John Deere understands the importance of increased technology and innovation to meet the needs of customers around the world. John Deere strives to meet the business conditions for their customers by developing cost strategies that meet the goals and expectations of the current customer base and future