Dakota Case Study

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  • Topic: Revenue, Electronic Data Interchange, Cost
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Case Study

Dakota Office Supply

Shadi Wadi-Ramahi

Instructor: Roger Waibel

MBA 510
Financial and Managerial Accounting

Master of Business Administration
School of Adult and Extended Learning
Oakland City University

September 30th,2010

* Contents
1Background Information3
1.1People / Key Players3
1.2Chronology of Key Relevant Events3
1.3Key Facts4
1.6Point of View5
2Problem Statement5
3Problem Causal Analysis5
4Management Theory, Process, Approach5
8Answer to questions7

1 Background Information
Dakota Office Products (DOP) is a regional distributor of office supplies with several distribution centers. The company has just suffered its first loss in its history even though sales have increased. Part of the sales increases can be attributed to the new “desk top” option, which DOP delivers products to customers directly with premium markup, introducing electronic data exchange and utilizing the internet for ordering. 2.1 People / Key Players

John MaloneGeneral Manager of DOP
Melissa DunhillController
Tim CunninghamDirector of Operations
Wilbur SmithSite Manager at a one of the Distribution Centers Hazel NutleyData Entry Operator

2.2 Chronology of Key Relevant Events
DOP introduced electronic data interchange in 1999 and in 2000 DOP started accepting orders online via its new website. The same year DOP introduced its website DOP started offering the convenience of delivering the packages of supplies directly to individual locations at the customer’s site, this was called “desk top”. The financial results of calendar year showed that DOP sales increases yet it has suffered its first loss in history.

2.3 Key Facts
The Activity Analysis made by Melissa shows the time required by Data Entry operators for each operation. The Analysis shows also the number of cartons processed for that year and amount of desktop deliveries handled by the distribution center. The Exhibits in this case study shows Dakota Office Products income statement and its expenses from running its operation, also Exhibit 2 & 3 compare two similar companies with one using EDI (Electronic Data Interchange) while the other is still using DOP human resources and placing smaller frequent orders and utilizing desktop deliveries for that. This comparison shows where DOP expenses are going and where they need to improve their operations.

2.4 Concepts
The major idea here is to understand how DOP can turn around its loss and reduce some of the overhead with increased sales. .
2.5 Assumptions

The biggest assumption is current management has a conflict between product approvals and with their ownership of competing companies stocks.

2.6 Point of View

To move Dakota Office Products to profitability while maintaining the increases in revenue. 2 Problem Statement
To encourage DOP customers to utilize its internet for ordering, thus generating better gross margins from this low cost system.

3 Problem Causal Analysis
The problem DOP is facing is the extra overhead from the new service they have introduced, this service being “desk top” delivery for their customers. This extra service that was introduced did contribute to the revenue stream of the company, but failed to contribute to the bottom line of the company. The lack of understanding of actual cost of the new services which meant wrong markup and high accounts receivable from certain customers, contributed to loss in this year.

4 Management Theory, Process, Approach
Activity Based Costing (ABC) is needed to be used as a new process in order to understand the affect of various operations in DOP. ABC will allow DOP to estimate the cost of its individual products and services and eliminate those which are unprofitable. Our Approach will be to study two...
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