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Analysis on
Dakota Office Products

Presented By:
Group F (Section B)
Amit Mohan Singh
Kumar Bardhan
Chaudhary Abhireet
Prakhar Chabbra
Sai Ravi Teja
Sandeep Nayak
Why was Dakotas existing pricing system inadequate for its 2
current operating environment?

Indirect cost Activity based

accounting accounting
Indirect costs are This will enable
allocated on the them to assign
basis of volume indirect costs
This method is properly to each
suitable when activity
overhead costs are
low
Estimate cost driver rates for each activity for Dakota Office Products
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(DOP) based on year 2000 data
Processing cartons in and out cost rate=
(90% of warehouse personnel expense + cost of items purchased)/ number of cartons
= 464.5 per cartons

Desktop Delivery Service =

(10% of warehouse personnel expense + delivery truck expense)/number of desktop delivery
services
= 220 per delivery services

Order Handling cost rate=

(Warehouse expense + Freight)/number of orders
= 102.08333 per order

Data entry cost rate =

Order entry expenses/ Total order lines
= 5.344 per lines
What explains the difference in the profitability of the 4
two customers?
Increase in number of both manual and EDI orders has led to lower profitability of Customer B
when compared to Customer A
Based on Customer Profitability analysis done for two customers, how such
information can help Dakota managers increase the profitability if the
analysis in applied to compete customer base?

Customer Profitability analysis
should be done by Dakota for all of
its customers. By doing so, it can
easily segment the customers base
on profitability and hence could
minimize the services offered to the
least profitable customers and
focus on the more profitable
customers.
It can also be analysed that the delivery cost is
not accurate, the cost for the desktop delivery
should be calculated according to the distance
from the ware house
To lower the delivery truck expenses applied on
the customers, Dakota should make use of its
truck fleet in other activities
Suppose that a major customer switched from placing all its 5
orders manually to placing all its orders over the internet site.
How should this affect the activity cost driver rates?

Increase in activity cost driver rate

Increase the DOPs profit due to time saved on manual handling and errors

This could also lead to an increase in desktop delivery charge

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THANK YOU
Happy Accounting