Posted: December 27th, 2014

JOHNSON BEVERAGE, INC+

JOHNSON BEVERAGE, INC+

For the exclusive use of M. Elbashir, 2014.
DARDENtbl uvmsa
BUSINESS PUBLISHING it“ 3- 29″”
UNIVERer’Yg‘VIRGINIA
JOHNSON BEVERAGE, INC.
As president and primary owner of Johnson Beverage, Inc. (.131), Jack Johnson was
beginning to realize that retaining long-term customers was becoming a challenge. During a
delivery run yesterday, driver Joe Stevens had noticed a competitor’s sales manager talking with
the general manager of Saver Superstore, one of JBl’s largest customers. Then, that morning,
Johnson’s sales manager, Marsha Ketchum, had mentioned that, during her visit with the same
general manager on Wednesday, he was starting to make some noises about wanting to negotiate
a lower price. This could cause a dilemma because this customer had been one of the company’s
largest and most loyal customers for years.
Johnson leaned back in his chair. These things always seemed to come up on Friday-
just in time to monopolize his thoughts over what otherwise would have been a restful weekend.
Deciding to address the situation head-on, he scheduled a meeting with Stevens, Ketchum, and
several others for later that afternoon.
Company Background
JBl distributed beverages to retail customers. The company had been in business for two
decades and had become a preferred distributor among several retail outlets in the local area. .lBl
primarily distributed bottled sports drinks made by small specialty beverage companies, and its
business had grown steadily with the popularity of sports drinks over the past 10 to 20 years.
Last year, JBl’s revenues totaled $12 million. The company serviced about 20 customers
whose beverage purchases totaled anywhere from about $100,000 to over $1 million annually.
The undiscounted list price on the sports drinks that IE] distributed was $15.20 per case of 24
bottles. The full cost (excluding customer service costs) of the bottled drinks was $13.10 per
case. The company offered discounts to some of its customers, which varied by customer based
on a number of factors, including the volume of drinks the customer purchased, the future
potential of the customer, and the negotiating success of the company’s sales representative,
among others.
This case was prepared by Associate Professor Luann J. Lynch. It was written as a basis For class discussion rather
than to illustrate effective or ineffective handling of an administrative situation. Copyright © 2009 by the University
of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-Inatl’ to
sales®dardcnbusmcsspublishing.com. No part of this publication may be reproduced. stored in a retrieval system,
used in a spreadsheet. or transmitted in any form or by any means electronic. mechanical, photocopying.
recording, or othem’t’se-wt’thout the pertntssmn afthe Darden School Foundation.
This document is authorized tor use only by Mohamed. Elbashlr n 2014.
ACCT331 Cost and Management Accounting
Fall 2014
Group Case Study
Due date: Written assignment to be submitted on 26th December 2014
This assignment contributes 15% to the total assessment for this course (10% for the
project report and 5% for the presentation)
The assignment is to be done in syndicates of 4 or 5 members
Read the case: JOHNSON BEVERAGE, INC. (attached)
Syndicate Membership:
You are required to form syndicates of 4 or 5 members and submit a syndicate form (see
attachment) to your instructor by 30th November 2014. Your mark will be based on the mark
that your syndicate achieves.
Requirements:
Your team has been invited by the management of Johnson Beverage, INC (JBI) to present an
overview of the issues facing the company. You are required to write a report to the
management of JBI, addressing the issues shown below. The report should be no more than 6
pages (excluding the title page, cover page, reference list, and appendices).
A. The management of Johnson Beverage are concerned about the relevance of its current
costing and billing systems:
1. Write an executive summary to highlight the main themes indicated in JBI case (10
Marks).
2. Describe the main features of the current costing and billing systems used by JBI? Your
answer should include the weaknesses of the current costing system (10 Marks).
3. .
1
B. The management of JBI notes that cost accuracy is crucial for product pricing and customer
retainment. You have been asked to address the following issues in your report:
1. Use the information in the case, including Exhibit 1 and 2 and any other necessary data
on activities and costs to propose a more relevant costing system for JBI. Use the costing
system you have proposed to allocate JBI’s overhead costs (25 Marks).
2. Explain the differences in the assumptions between JBI’s current costing system and the
costing system you have recommended in (B.1) above (10 Marks).
3. Use the costing system information calculated in (B.1) above to estimate customer
profitability for Saver Superstore, Oscar’s OddLots, Midwellen Supermarket, and Downtown Retail
(15 Marks).
4. Compare the costs and profit per customer you have calculated using your recommended
costing system (B.3) and the estimated costs using JBI’s current costing system:
a.
What causes the two costing systems to provide different cost estimates? (10
Marks)
C. Which costing system provides management of JBI with better information? Why? Drawing
on your answers on (B) above:
a. What are the strategic implications of your analysis? Your answer should include your
recommendations to the management regarding the company’s costing systems and
pricing policy AND any tactical and strategic approaches that they should adopt in
order to enhance the company performance, retain customers and remain
competitive (20 Marks).
2
General guidelines:

Your report should contain:
(a) Group assessment cover sheet (not included in page limit). This cover sheet must
include your team members’ full names, student ID numbers, and signature.
(b) The report should contain, immediately after the cover sheet, a
contribution page that includes one paragraph written about the input of each
member of the team. The paragraph should highlights the contribution of
each member towards the accomplishment of the project AND the steps and
procedures undertaken by the team member in order to accomplish his/her
task.
(c) A maximum of 6 pages of text covering all of the requirements set out in the
assignment questions (excluding the cover page, contribution page, reference
list, and appendices).
(d) Appendices which reports all your calculations and reference list.
(e) The report is a joint responsibility, and each member is responsible for the
numerical accuracy, presentation, and the standard of writing. If there are
problems within the group which you cannot resolve, please discuss them
IMMEDIATELY with your instructor
(f) The instructor may ask the team members to conduct a peer evaluation if he
feels there has been an unequal contribution from the team members towards
the project. Please see the Peer Evaluation Form for more details.
(g) Please use Times New Roman, 12 font in double spaced, and minimum of
2cm on each margin for the body of the report. Also ADJUST THE LINES
IN ALL THE PARAGRAPHES.
Good luck!
3
Qatar University
College of Business and Economics
Department of Accounting and Information Systems
ACCT331 Cost and Management Accounting
Fall 2014
Syndicate Membership Form
A copy of this form is to be submitted in class to the lecturer in the first lecture of
the week starting 30th November.
Student ID #
Family name
Given name(s)
1
Leader
2
3
4
5
4
Signature

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