Dakota Office Products Case Study

Topics: Costs, Variable cost, Cost driver Pages: 3 (997 words) Published: May 24, 2010
1. Why was Dakota’s existing pricing system inadequate for its current operating environment? DOP’s 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 DOP’s business as it will calculate costs of products and services based on the activities involved and resources absorbed. Furthermore, the DOP’s 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 based costing system for Dakota Office Products based on Year 2000 data. Calculate the activity cost-driver rate for each Dakota Office Product activity in 2000. #| Activity| Assigned cost centers| $| Cost driver| Activity quantity| Cost driver rate ($/quantity)| Unit of service| 1| Process cartons in and out of the facility| 90% of Warehouse personnel expense Cost of items purchased| 37,160,000 | cartons| 80,000 | 464.5| $/per carton| 2| The new desk top delivery service:|  |  |  |  |  |  |  | 2a New desk top cartons deliveries| 10% of Warehouse personnel Delivery truck expenses| 440,000 | cartons| 5,000 | 88| $/per carton|  | 2b New desk top deliveries| 10% of Warehouse personnel Delivery truck expenses| 440,000 | deliveries| 2,000 | 220| $/per delivery...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay about Case Analysis Dakota Office Products
  • Dakota Office Products Case Essay
  • Office Dakota Products Case Analysis Essay
  • Essay on Dakota Office Products Study Case
  • Essay about Dakota Office Products Case
  • Dakota Office Products Essay
  • Dakota Case Study Essay
  • Allied Office Product Case Study Essay

Become a StudyMode Member

Sign Up - It's Free