MEMORANDUM DATE: February 10, 2015 TO: John Malone, General Manager Dakota Office Products FROM: ------------------------------------------------- RE: Analysis of Dakota Office Product Cost Accounting System and Recommendations As requested, we have evaluated the accounting practices of Dakota Office Products (DOP), and have reviewed the current cost accounting system along with customer examples. Based on our evaluation, we have reached the following conclusions: 1. The current
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To: Mr. John Malone From: Mr. John Doe CC: Ms. Melissa Dunhill Mr. Tim Cunningham Re: Dakota Office Products Dakota Office Products (DOP) is concerned with the most recent financial statement results after realizing an apparent yearly loss. This is the first loss in the company’s history, which is alarming to management and operations. The income statement, provided in Appendix I, indicates that DOP suffered a net profit before taxes of -1.3% in the year 2000. This memo is in direct regards
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was Dakota’s existing pricing system inadequate for its current operating environment? - profits only when clients placed large orders for cartons - real drop of profit if many clients place small orders - wrong cost determination for individual customers - wrong cost determination for new services provided by DOP (to small charges for the “desktop” delivery, then the actual cost of it) 2. Develop an activity-base cost system for Dakota Office Products based
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Case Study: Dakota Office Products 1) Identify expenses on the income statement that are sales fulfillment expenses and divide them into cost pools. * Warehouse Expenses: includes personal and non-personal expenses related processing cost within the facility * Desktop Truck Expenses: includes personnel and delivery truck expenses related to performing desktop delivery functions. * Commercial Delivery Expenses: includes freight cost * Order Entry Expenses: includes manual order
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Dakota Office Products Case 1. Why was Dakota’s existing pricing system inadequate for its current operating environment? Some problems with the current operating environment include: * Profits only when clients placed large orders for cartons * Real drop of profit when many clients place small orders * Wrong cost determination for individual customers * Wrong cost determination for new services provided by DOP Dakota Office Product uses traditional costing system where direct
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i. Why was Dakota’s existing pricing system inadequate for its current operating environment? (Hint: Consider why ABC might be a good idea) It is evident in the Dakota Office Products case that there is a wide variety of product created by Dakota that is shipped to their customers. That, paired with the fact that there are high overhead costs related to the desktop delivery option, also tells the reader that an incorrect accounting system is currently being used. One needs only to look
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Nedim Halilagic Prof. Ermin Cero ACCT 306 December 10, 2013 Dakota Office Products Dakota Office Products (DOP) is a regional office supply company with a strong reputation for customer service and quality supplies. Additionally, DOP is unafraid to adopt new service operations such as its “desk top” delivery option which delivered smaller orders directly to individual sites as we all as its traditional commercially delivered mass orders to customer distribution sites (Kaplan, 2003, pp.1-2)
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consultant was one that is very competent in analyzing the issues of cost, both fixed, variable and semivariable. He then tried to relate his knowledge to help Mr. Delaney in his dilemma. Mr. Delaney decided that he wants to provide a high quality product to his customers. He wanted the consultant to further assist him in his analysis by finding out more about his competitors and the prices they charged. The consultant made suggestions that included leasing the body shop to another party, liquidating
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1. Why was Dakota's pricing system inadequate for its current operating environment? Currently, DOP's pricing system is pricing products by adding markup twice, which is marking up the purchased product cost by around 15% to cover the cost of warehousing, distribution, and freight. Then add another markup to cover the approximate cost, for general and selling expenses, plus an allowance for profit. We found that the existing pricing system is inadequate regarding to following points: The
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Steadman 135 IMPLEMENTING THE ACTIVITY BASE COSTING SYSTEM: A CASE STUDY ON DAKOTA OFFICE SUPPLY By Betty W. Steadman Overview Activity Based Costing (ABC) is an accounting method that allows an organization to determine actual costs associated with each product and/or service produced by the organization without regard to the organizational structure or other extraneous function. For Dakota Office Products (DOP), its existing costing system was inadequate because it is incapable of accounting
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