Research and Application 2-8 [Dell] Managerial Accounting

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Research and Application 2-8
[Dell]
Managerial Accounting
Fall 2010

Required 4:
Dell is a manufacturer.
The information that supports my conclusion is in the section sub heading Manufacturing and Materials, which says, “Dell manufactures most of the products it sells and has manufacturing locations worldwide to service its global customer base”. This strategy has made Dell what it is today and as a result given it a competitive advantage. The build to order strategy has enabled Dell reduce its cost and also given customers a sense of satisfaction in terms of customization. Required 5:

Direct inventoriable cost: cost computer hard drives and other parts used to build the computer units. Indirect inventoriable cost: cost of utility, cost of securing the building where the units are built, and cost of paying the janitors. Gross margin has increased steadily from 2003-2005 and yet the gross margin as a percent of net revenue has only increased slightly, because net revenue is a percentage of gross margin and net revenue. For net revenue to increase more than it has net revenue would have to have increase a great deal between 2003 and 2005. From the report in the 10-K filing net revenue only increased by 6,040 billion (2003-2004) and by 7,761 billion (2004-2005). This range is small enough to make the net revenue increase slightly. Also this could be a reason why “the year-over-year improvement during fiscal 2005 and 2004 was primarily driven by Dell’s continued cost savings initiatives. During fiscal 2005, component costs continued to decline at a moderate pace that was relatively comparable to fiscal 2004. Management utilized these cost declines to balance profitable growth while passing on cost savings to its customers.”
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