Research Paper
Cost Accounting - I
Dakota Office Products
PGP1 – Section B
Group 6
Submitted By:-
AMOL DHAIGUDE
KHAGESH KAUSHAL
MOHAMMAD AMIR
POONAM VERMA
R. ANAND
SUBINAY BEDI
Dakota Office Products
Q.1) Why was Dakota’s existing pricing system inadequate for its current operating environment?
The Account receivable policy is very liberal causing the losses in customer B and is affecting the working capital (10%) line of credit. Average payment period for customer A is 30 days and 90 days for customer B. Dakota's existing pricing strategy is arbitrary, to the extent that it estimates cost markups on the basis of historically exhibited trends, rather than trying to identify cost structures and contributions arising from various activities. The existing costing strategy pools various costs together despite evidence that their underlying drivers are not the same.
Dakota has recently innovated by providing desktop delivery, the costs of which, and the historical basis for which has not been established, consequently Dakota finds itself under-costing its services. It is unable to accurately estimate desktop delivery costs which result in the organization incurring losses in the 2000 operating year.
Q. 2) Develop an activity based cost system for Dakota office products based on year 2000 data. Calculate the activity cost driver rate for each DOP activity in 2000
|Activities & Costs |
|Activities |Drivers |Costs |
|Ship Cartons |No. of cartons |Freight( commercial& Own) |
|Process Cartons |No. of cartons
Dakota Office Products
PGP1 – Section B
Group 6
Submitted By:-
AMOL DHAIGUDE
KHAGESH KAUSHAL
MOHAMMAD AMIR
POONAM VERMA
R. ANAND
SUBINAY BEDI
Dakota Office Products
Q.1) Why was Dakota’s existing pricing system inadequate for its current operating environment?
The Account receivable policy is very liberal causing the losses in customer B and is affecting the working capital (10%) line of credit. Average payment period for customer A is 30 days and 90 days for customer B. Dakota's existing pricing strategy is arbitrary, to the extent that it estimates cost markups on the basis of historically exhibited trends, rather than trying to identify cost structures and contributions arising from various activities. The existing costing strategy pools various costs together despite evidence that their underlying drivers are not the same.
Dakota has recently innovated by providing desktop delivery, the costs of which, and the historical basis for which has not been established, consequently Dakota finds itself under-costing its services. It is unable to accurately estimate desktop delivery costs which result in the organization incurring losses in the 2000 operating year.
Q. 2) Develop an activity based cost system for Dakota office products based on year 2000 data. Calculate the activity cost driver rate for each DOP activity in 2000
|Activities & Costs |
|Activities |Drivers |Costs |
|Ship Cartons |No. of cartons |Freight( commercial& Own) |
|Process Cartons |No. of cartons