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    Dakota Office Products

    Uploaded by

    Nidhi Bhartia
    Dakota Office Products distributes office supplies through distribution centers and desktop or commercial deliveries. It calculates costs using activity-based costing with activities like warehousing, commercial freight, desktop deliveries, and order entry. ABC costing shows Customer A is more profitable than B due to lower costs from commercial freight versus desktop delivery. It recommends encouraging EDI use and charging $53.2 more per desktop delivery carton to cover higher costs.

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    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd

    Dakota Office Products

    Uploaded by

    Nidhi Bhartia
    3K views10 pages
    Dakota Office Products distributes office supplies through distribution centers and desktop or commercial deliveries. It calculates costs using activity-based costing with activities like warehousing, commercial freight, desktop deliveries, and order entry. ABC costing shows Customer A is more profitable than B due to lower costs from commercial freight versus desktop delivery. It recommends encouraging EDI use and charging $53.2 more per desktop delivery carton to cover higher costs.

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    Dakota Office Products distributes office supplies through distribution centers and desktop or commercial deliveries. It calculates costs using activity-based costing with activities like warehousing, commercial freight, desktop deliveries, and order entry. ABC costing shows Customer A is more profitable than B due to lower costs from commercial freight versus desktop delivery. It recommends encouraging EDI use and charging $53.2 more per desktop delivery carton to cover higher costs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    3K views10 pages

    Dakota Office Products

    Uploaded by

    Nidhi Bhartia
    Dakota Office Products distributes office supplies through distribution centers and desktop or commercial deliveries. It calculates costs using activity-based costing with activities like warehousing, commercial freight, desktop deliveries, and order entry. ABC costing shows Customer A is more profitable than B due to lower costs from commercial freight versus desktop delivery. It recommends encouraging EDI use and charging $53.2 more per desktop delivery carton to cover higher costs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    Dakota Office Products

    Anurag Agarwal
    Abin Joy
    Nidhi Bhartia
    Rahul Mittal
    Sidharth
    Nitin
    Case Facts
    Regional distributors of office supplies
    Activities involved in Distribution Centres:
     Process cartons in and out
     Desktop delivery services
     Order Handling
     Data entry- Manual entry & Electronic data interchange
    Two types of Customers:
     Customer A: Commercial freight & EDI
     Customer B: Desktop Delivery & Manual orders
    Calculating ACDR
    Activity Activity Activity cost Cost Driver Activity Cost
    Expense driver Quantity Driver Rate

    Warehousing 2,000,000 No. of cartons 80000 25


    (excl Personnel)
    Commercial 450,000 No. of cartons of 75000 6
    Freight non desktop
    delivery
    Delivery truck 200,000 No. of cartons of 5000 40
    expenses Desktop deliveries

    Order Entry 800,000 Data Entry 10000 80


    Expenses operators time
    Apportionment of Order entry
    expenses
    Activity Activity Activity cost Cost Driver Activity Cost
    Expense driver Quantity Driver Rate

    Set up manual 80*2000 No. of manual 16000 10


    customer order =160000 orders
    Enter 80*7500 No. of order lines 150000 4
    individual =600000
    order lines in
    an order
    Validate 80*500 No. of EDI orders 8000 5
    internet orders =40000
    Apportionment of Warehouse Personnel
    Expenses

    Activity Activity Activity cost Cost Driver Activity Cost


    Expense driver Quantity Driver Rate
    Desktop deliveries .10*2400000 No. of cartons 5000 48
    =240000 of Desktop
    deliveries
    Preparation for non .90*2400000 No. of cartons 75000 28.8
    desktop deliveries =2160000 of Desktop
    deliveries
    Customer profitability Report- Customer A
    Particulars Current method Acc to ABC Costing
    No. of Cartons 200 200
    Sales 103,000 103,000
    Cost of Items 85000 85000
    Gross Margin 18000 18000
    Warehousing 5000 (200*25)
    Distribut Personnel Expenses 5760 (200*28.8)
    ion 12750
    Commercial Freight 1200 (200*6)
    Order Entry 330 (6*10+60*4+6*5)
    Total Warehousing, Distribution, 12750 12290
    order entry Cost
    Contribution to general & selling 5,250 5710
    expenses and Profit
    Customer profitability Report- Customer B
    Particulars Current method Acc to ABC Costing
    No. of Cartons 200 200
    Sales 104,000 104,000
    Cost of Items 85000 85000
    Gross Margin 19000 19000
    Warehousing 5000 (200*25)
    Distribut Personnel Expenses 6720 (50*48+150*28.8)
    ion 12750
    Commercial Freight 2900 (50*40+150*6)

    Order Entry 1720 (100*10+180*4)


    Total Warehousing, Distribution, 12750 16340
    order entry Cost
    Contribution to general & selling 5,250 2660
    expenses and Profit
    Comparing Customer A &B
    Particulars Customer A Customer B

    Contribution to general & selling 5710 2660


    expenses and Profit

    Interest Cost 10% of 9000 10% of 30000


    (10% of Average A/C Receivable) =900 =3000

    Net Contribution to General & Selling 4810 (340)


    Expenses and Profit
    Desktop Deliveries Vs. Commercial
    Truckers
    Particulars Commercial Desktop Incremental Cost
    Truckers Deliveries

    Personnel 28.8 48 19.2


    Expense per
    Carton

    Delivery cost per 6 40 34


    carton

    Total 34.4 88 53.2


    Recommendations
    System Recommendation
     Use of ABC Costing
     Encourage use EDI system by the customers
     Desktop deliveries to be provided not without an incremental
    price of $53.2 per carton

    Customer Recommendation:
     Customer A has higher contribution and should be preferred
    over Customer B
     Customer B should be encouraged to use EDI. This will
    reduce the cost by $1120 (1720-600) and increase its
    contribution to 780

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