Dakota summary

Dakota summary - Dakota Office Products: A Case Study using...

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Dakota Office Products: A Case Study using Activity Based Costing Daniel Romero Richard Schultz Marie Shankland Christine Sutton Florida Institute of Technology
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Dakota Office Products 2 Dakota Office Products: A Case Study using Activity Based Costing The general manager of Dakota Office Products (DOP), John Malone was concerned by the financial results of the fiscal year with increased sales but a historic first loss as indicated in the income statement. Dakota Office Products distributes office supplies with a compressive product line. DOP has an excellent reputation for customer service and excellent response time. It operates distribution centers with storage locations and shipments pending customer orders. Dakota Office Products normally ships orders by commercial truckers and recently implemented a “desk top” option to new business clients that has products and supplies shipped directly to site locations. The company charges a premium price percentage for the service with hopes of improving margins in its highly competitive business. Products are priced to its end-use customers with a 15% markup to cover costs of warehousing, distribution and freight. It also adds another markup for general and selling expenses as well as for profit. Pricing is adjusted according to relationship and competitive situations. In 1999 Dakota Office Products introduced an electronic data interchange (EDI) and a new internet site in 2000. This new system allows an automated ordering system that did not require a manual input of data. Dakota's costs continued to increase despite the technological innovations being implemented. John Malone was concerned because the company could not make a profit. He wanted to take action to regain the company's profitability. He first went to his controller, Melissa Dunhill, the director of operations, Tim Cunningham to analyze the distribution centers and the facilities operations. Together, they identified four primary activities -process cartons in and out of the center, operating the new desk top delivery service, order handling and data entry. Space depended on the storage of cartons. Turnover was dependent of volume of cartons shipped in and out of the facility. Commercial freight incurs costs based on volume
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Dakota Office Products 3 as well and the costs are relatively the same for each shipment. The desk top delivered items is not subject to the commercial shipping charges. Malone, Dunhill and Cunningham continue to evaluate the expenses of data processing.
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This note was uploaded on 05/15/2011 for the course BUS 3650 taught by Professor Collins during the Spring '11 term at FIT.

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Dakota summary - Dakota Office Products: A Case Study using...

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