Dakota

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Dakota Office Products Case Analysis

Concern over a first year loss prompted a case study of the business operations of Dakota Office Products. Harvard Business School professor Robert S. Kaplan authored the case study as an illustration of use of activity based cost allocation and profitability (Kaplan, 2005). In the case presentation, John Malone, the General Manager of Dakota Office Products (DOP) commissioned analysis of the company’s operations and cost allocation practices; it focused on the company’s distribution center. Activities that emerged as cost drivers included: commercial freight shipping, personal delivery of orders under the Desktop Delivery program, warehouse handling and space, and several product ordering and entry activities. In this paper, the cost drivers were utilized to establish activity-based costing for DOP. Profitability for two current DOP customers was also analyzed for behavior patterns that might lead to or suggest improved pricing. Specific assignment questions were detailed and answered on the topic of relative profitability of the two customers. The objective of the analysis was to utilize learnings from the profitability calculations in order to make recommendations which would return DOP to profitable operation following the year of the unexpected loss. If the methods in this paper were utilized, it is felt to be a useful tool to assist DOP management in turning the company around.

Method The assignment is summarized in this section, followed by a detail of steps taken to complete it. Data from the case study was used to develop an activity-based costing system. The activity-based costing system is shown in Table 1. Based on a 1 year history, relative profitability of two customers was determined using the variable direct cost drivers summed with interest on accounts receivables and selling and administration…...

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