Dakota Office Products Case Essay

1 Dakota current allots warehousing, distribution and pose admission toll equally to sepa tellly guest. DOPs pricing system is chiefly independent of the specific level of ope stray provided for clients. They just chose a single salute drive. However, its not believable and decorous to phthisis this simple method to poll exists when courts are much complex. So we need to determination employment- base court system to chose antithetic constitute drives and allocate exists based on the activity.2 We identify four different activities for all termss, site discourse speak to, ship cartonfulful cost or normal moneymaking(prenominal) warhead cost, backcloth pitch shot cost, and secern touch on cost.As we noticed, the distribution magnetic core team reported 90% of their workers belong carton in and aside of facility. So, the tote up cost for ensnare handling is $4,160,000, which is the coupling of 90% of wareho expend personnel cost and warehous e expenses (excluding personnel). This cost only depends on the lean of cartons moved in and out of storage. So the occur handling cost need to be allocated by the number of cartons processed in year 2000, which is 80,000 cartons. consequently we lead the strike rate for handling cost that is $52.00 per carton. We only have the dispatch cost that is associated with normal shipment. We differentiate total cost $450,000 by the number of carton shipped only through normal shipment, which is 750,000 cartons. Then, we narrow the overhead rate for ship carton, which is $6.00 per carton.We besides have desktop deliver natural selection for customer. The total cost for 2000 delivers during 2012 is the sum of 10% of warehouse personnel expense and delivery truck expenses, which is $440,000. The overhead rate for desktop deliver is $220 per deliver. As rear processing cost, we use weight just method, based on the hour used to divide this cost into three part, manual of arms of arms consecrate demarcation rakehell, origination times manual beau monde and EDI busts. We calculate total cost for manual order confinement $160,000 and it had 16,000 orders. So the overhead rate for manual order limitation is $10 per order. gist cost for line items is $600,000 and it had total 150,000 lines. The overhead rate for line item is $4 per line item. come up cost for EDI checks is 400,000 and it had 8,000 checks. The overhead rate for EDI check is $ 50 per order.3 According to the promenade 3, we find the number of individually activity provided to customers A and B during year 2000. We use these number multiplies each overhead rate to get overhead costs for each activity. For customer A, we have gross border $18,000 and other(a) costs including, order handing cost $10,400, ship carton cost $1,200, manual order cost $60, line items $240, and EDI orders cost $300. customer A also has stakes expense based on his average accounts receivable within 30 days, which is $9,000 and yearbook amour rate is 10%. Therefore, the interest expense for customer A is $75. We use gross brim $18,000 subtracts total other cost including interest expense $12,275 to get profit for customer A, which is $5,725. We use the kindred method to get gross margin for customer B is $19,000 and total other cost including interest expense is $19,020. So customer B loses $20.4 Customer A use normal shipment and most of orders are EDI orders. These two could prevent much make pass and is much than paid for the company. However, customer B have 25 desktop deliveries. This cost is about 6.47% of cost of items purchased. Also, customer B uses traditional manual order and manual line items order that cost more. Additionally, interest expense for customer B is also very high because of his payments always after 90 days with a higher payment amount. Total other cost for customer B is 1.55 times of customer A. Therefore, customer A is more profitable and customer B loses $20.5 and 6 The only limitation for customer A is manual order and line items. We suggest customer A use EDI orders instead of these two. It could save cost and make more profit. For customer B, the cost for desktop deliveries is very high and customer B use traditional manual order entry without EDI. It costs a lot for customer B. We recommend customer B light the desktop deliveries or increase the price for desktop deliveries to subvent the cost. We also suggest customer B switch traditional manual order entry and line items to EDI orders. This technology would sponsor save cost and be more profitable for custer A and B.7 infra activity-based costing, we allocate all costs into different activity. So, we could easily see the cost for each activity related to our cost of items purchased. We keep figure out which activity is more costing and take control this cost to increase our profit.8 If a major(ip) customer switches from placing all its orders manually to placi ng all its orders over the meshwork site, we will spend more workers hour on EDI checks. We use weight-average method to allocate order entry expenses into three activities, manual order, line items, and EDI checks. So, the expenses for manual order and line items could be decrease and expenses for EDI checks increases. We need to recalculate the overhead rate for both three activities. Additionally, the cost for EDI checks is more cheaper than the other two. So, if a major customer places all order over internet site, it would save cost and make more profit for company.