Dakota Office Products Case Study
Description
In ACC 301, you discussed the Dakota Office Products (DOP) case and were asked to design the ABC system. For this assignment in BCOM 250, you will take what you learned in ACC 301 and write a report recommending that DOP use activity-based costing to determine its pricing to customers. You do not need to go into deep detail about how you would design the ABC system. You will work with a team of 4-5 people to produce this deliverable.
Assume that your group is part of the accounting staff at DOP. You should address your memo to Melissa Dunhill, controller at DOP. She will decide whether your recommendation is appropriate to send to General Manager John Malone. You should consider Dunhill your primary audience and Malone your secondary …show more content…
The ABC method will provide a more extensive analysis of our customers’ behaviors and their usages of various resources, allowing us to price our products to best capitalize on different customer segments. Currently, we are charging our customers a rate based on units produced, a method that fails to highlight the differences in our customers’ behaviors. Upon further investigation, we have determined that the following six activities - Processing Cartons, Desktop Delivery, Manual-Order, EDI order, Data Entry, and Shipping - are required for all orders. By implementing a costing system that acknowledges these distinguished activities, we will more effectively trace different costs to our customers.
For example, though both customers A and B were charged $12,750 for warehousing, distribution, and order entry, ABC analysis revealed a great degree of variation in their activity costs. While customer A used the less costly electronic ordering system (EDI) half the time, customer B never used it, resulting in higher order entry costs. By implementing an ABC system, subtle differences in activity costs among customers can be illuminated and more readily acted …show more content…
DOP will then use cost drivers, such as Processing Cartons, to distribute the costs to various customers. Using this new information, DOP can charge its customers appropriate amounts, thus reducing our negative customers to
In ACC 301, you discussed the Dakota Office Products (DOP) case and were asked to design the ABC system. For this assignment in BCOM 250, you will take what you learned in ACC 301 and write a report recommending that DOP use activity-based costing to determine its pricing to customers. You do not need to go into deep detail about how you would design the ABC system. You will work with a team of 4-5 people to produce this deliverable.
Assume that your group is part of the accounting staff at DOP. You should address your memo to Melissa Dunhill, controller at DOP. She will decide whether your recommendation is appropriate to send to General Manager John Malone. You should consider Dunhill your primary audience and Malone your secondary …show more content…
The ABC method will provide a more extensive analysis of our customers’ behaviors and their usages of various resources, allowing us to price our products to best capitalize on different customer segments. Currently, we are charging our customers a rate based on units produced, a method that fails to highlight the differences in our customers’ behaviors. Upon further investigation, we have determined that the following six activities - Processing Cartons, Desktop Delivery, Manual-Order, EDI order, Data Entry, and Shipping - are required for all orders. By implementing a costing system that acknowledges these distinguished activities, we will more effectively trace different costs to our customers.
For example, though both customers A and B were charged $12,750 for warehousing, distribution, and order entry, ABC analysis revealed a great degree of variation in their activity costs. While customer A used the less costly electronic ordering system (EDI) half the time, customer B never used it, resulting in higher order entry costs. By implementing an ABC system, subtle differences in activity costs among customers can be illuminated and more readily acted …show more content…
DOP will then use cost drivers, such as Processing Cartons, to distribute the costs to various customers. Using this new information, DOP can charge its customers appropriate amounts, thus reducing our negative customers to