Sie sind auf Seite 1von 5

Questions: Dakota Office Products

1. Why was Dakotas existing pricing system inadequate for its current operating environment? 2. Provide a brief analysis of the attached (page 2 of this document) activity-based costing system. Do you agree with the activities and/or cost drivers identified for each activity? Why or why not? 3. Using the activity-based costing system from Question 2, calculate the profitability of Customer A and Customer B. (Hint: This should be a relatively straightforward calculation given the ABC system in Question 2) 4. What explains any difference in profitability between the two customers? What are the limitations, if any, to the estimates of the profitability of the two customers? 5. Assume that Dakota applies the analysis done in Question 3 to its entire customer base. How could such information help the Dakota managers increase company profits?

Dakota Office Products Study Case

1. Why was Dakotas existing pricing system inadequate for its current operating environment? profits only when clients placed large orders for cartons real drop of profit if many clients place small orders wrong cost determination for individual customers wrong cost determination for new services provided by DOP (to small charges for the

desktop delivery, then the actual cost of it) DOPs has chosen to use a traditional cost pricing system where direct and indirect costs are assigned and allocated to products and services delivered to clients. This system has proven beneficial for companies where production operations are high labor intensive and overhead costs are smaller part of total costs. Nowadays, when automation and technology are ubiquitous overhead costs make up much higher percentage and are often lumped together with direct labor costs. An ABC approach would be much more appropriate for the DOPs business as it will calculate costs of products and services based on the activities involved and resources absorbed. Furthermore, the DOPs pricing system is described as independent of the specific level of service developed which automatically signals for the cross-subsidies phenomenon where some services costs are understated and others overstated. This happens in companies where overhead costs are too complex for the simple overhead allocation system used as it is at DOP.

2. Develop an activity-base cost system for Dakota Office Products based on Year 200 data. Calculate the activity cost-driver rate for each DOP activity in 2000. Activity cost-driver rates: Activity One: process cartons in and out of the facility Rate=(90% of Warehouse Personnel Expense + Cost o Items Purchased)/cartons processed Rate=(90%*2,400,000+35,000,000)/80,000=464.5 $/per carton Activity Two: the new desktop delivery service

Rate=(10% of Warehouse Personnel Expense + Delivery Truck Expenses)/desktop deliveries Rate=(10%*2,400,000+200,000)/2000=220 $/per carton Activity Three: order handling Rate=( Warehouse Expenses + Freight)/ number of orders Rate=(2,000,000+450,000)/(16,000+8,000)=102.08 $/per order Activity Four: data entry Rate=Order entry expenses/Order lines Rate=800,000/150,000=5.3 orders/per line

3. Using your answer to question 2, calculate the profitability of Customer A and Customer B. Activity One: process cartons in and out of the facility > Number of cartons ordered Activity Two: the new desktop delivery service > Number of desktop deliveries Activity Three: order handling > Number of orders (manual + EDI) Activity Four: data entry > Number of line items Manufacturing Overhead cost-driver rates Customer A Customer B Customer A* Customer B* Activity One 464.5 200 200 92900 92900 Activity Two 220 0 25 0 5500 Activity Three 102.08 12 100 1224.96 102,08 Activity Four 5.3 60 180 318 954 94,442.96 Profitability:... 109,562

OPERATING COSTS $5,850,000

Freight $450,000

Warehouse Rent & Depreciation $2,000,000 100%

Warehouse Distribution Personnel $2,400,000 90% 10%

Delivery Truck Expenses $200,000 100%

Order Entry Expenses $800,000

100%

20% 75%

5%

Ship Cartons $450,000

Process Cartons $4,160,000

Deliver to Desktop $440,000

Process Manual Custom Order $160,000


160 / 16 = $10 / manual order

Enter Items Ordered (Manual) $600,000

Process EDI Order $40,000

450/75 = $6/carton

4,160 / 80 = $52/carton

440 / 2 = $220 / delivery

600 / 150 = $4 / line

40 / 8 = $5 / EDI order

ORDERS

Das könnte Ihnen auch gefallen