1. Why was Dakota’s existing pricing system inadequate for its current operating environment? Profit margins varied based upon the size of the order, larger orders were more profitable than small orders. Based upon customer order size, prices should have been varied and the cost determination of the DOP should have been evaluated as it generated a loss.
2. Develop an ABC system for Dakota based on the Year 2000 data. Calculate the activity cost-diver rate for each activity in 2000.
a. Order Entry i. Order Entry Expenses/Order Lines ii. 800,000/150,000= $5. 3/line
b. Carton Processing i. (90% of warehouse personnel expense + Cost of Items)/cartons ii. (9*2,400,000+35,000,000)/80,000= $464. 5/carton
c. DOP i. (10% of warehouse personnel expense + delivery truck expense)/ DOPs ii. (1*2,400,000+200,000)/2,000= $220/carton d. Handling
i. (warehouse expenses + freight)/ orders ii. (2,000,000+450,000)/24,000= $102. 08/order
3. Using your answer to #2, calculate the profitability for Customers A and B.
Order Entry $ 5. 30 60 $ 318. 0 180 $ 954. 00
Carton Process $ 464. 50 200 $ 92,900. 00 200 $ 92,900. 00
DOP $ 220. 00 0 $ – 25 $ 5,500. 00
Handling $ 102. 80 12 $ 1,233. 60 100 $ 10,280. 00
Revenue $ 103,000. 00 $ 104,000. 00
Total Cost $ 94,451. 60 $ 109,634. 00
Net Profit $ 8,548. 40 $ (5,634. 00)
Profitability %8. 30%-5. 42%
4. What explains any difference in profitability between the two customers? The key difference between the profitability of the two customers is the method of delivery, number, and size of each order.
5. What are the limitations, if any, to the estimates of the profitability of the two customers? Limitations to the estimates of profitability for these two customers are mainly focused on the lack of information. There may be other tangible or intangible pieces of information that may play a significant role in these estimates.
6. Is there any additional information you would like to have to explain the relative profitability of the two customers? Additional information that would be useful around this estimate would include: -Delivery per labor hour -Wages or number of personnel -Number of resources (labor) in each activity
7. Assume that Dakota applies the analysis done in #3 to its entire customer base. How could such information help Dakota managers increase company profits? Dakota managers should revise the desktop delivery pricing to be higher to prevent loss. Customer pricing should be revised based on the number and size of each order. Suppose that a major customer switched from placing all its orders manually to placing all its orders over the Internet site. How should this affect the activity cost driver rates calculated in #2? How would the switch affect Dakota’s profitability? This action would affect two areas, order entry and process cartons. The cost per order would decrease as less labor is need for both processing and entry which would result in increased profitability as two out f the four activities would be reduced.
Why Work with Us
Top Quality and Well-Researched Papers
We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.
Professional and Experienced Academic Writers
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
Free Unlimited Revisions
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.
Prompt Delivery and 100% Money-Back-Guarantee
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.
Original & Confidential
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.
24/7 Customer Support
Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Our Services
No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.
Essays
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
Admissions
Admission Essays & Business Writing Help
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Reviews
Editing Support
Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
Reviews
Revision Support
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.