Submitted by:

Submitted to:
Your Name: Swapnil Agrawal
Prof. Archana Patro
PGP I, Roll no-152, Sec: B our!e In!tructor:
"ana#ement Accountin#
Re$ection Pa%er &
'(-Se%-2(1)
Dakota Ofce Products
Executive Summary:
The given case-study is for Dakota Ofce Products to evaluate current business
operations and recommend future actions necessary to ensure company
success. In given case-study of the company inefcient business practices which
led to the companys frst proft loss in its history needs to be identifed. The
analysis requires evaluating the companys current pricing structure, ordering
methods, shipping and delivery process, and defciencies in cash fows.
Dakota Ofce Products current pricing system is inadequate for its current
operating environment. Dakota Ofce Products is a regional distributor of ofce
products to institutions and commercial businesses, with a reputation for
excellent customer service. Dakota Ofce Products currently provides a diverse
product line and uses a cost plus method for pricing goods. Additionally, they
have also arranged for several distribution centers where the shipments are
required to be unloaded and packed into cartons intended to be delivered to their
respective customers. Allocating a fxed mark-up for all products ofered has
been efective, but Dakota Ofce Products may be missing opportunities for
increased proft in products where margins could be larger.
Dakota Ofce Products also introduced a new delivery concept in the current
year, Desktop Delivery, to attract new business and ofer a more personalized
experience. The new service did attract new customers but the inadequate
additional mark-up of 2% for desktop delivery did not cover the costs of providing
the service. If clients utilizing desktop delivery place smaller orders it has a
negative efect on proft because costs are not covered.
To test the current pricing margins, an Activities Based Cost System was used to
analyze the 2000 data and determine what areas should assume a greater
allocation rate as well as identify the areas that should not. First Melissa
graphed out the cost pools seen within Dakota Ofce Products and associated
expenses that applied to those pools. Then utilized the Activities Based Cost
System to compute the allocation.
Issue:
Electronic Data Interchange (EDI) expanded DOPs customer service and quality
metrics but also came with a cost which the company had difculty identifying.
While exact costs were difcult to ascertain for DOP it is clear that the company
is incurring. Since the company did not actually break down costs in order to
arrive at a more accurate pricing schedule but instead relied only on a universal
15% markup over basic material costs, DOP had absolutely no way of being able
to identify where the cost inefciencies were in its operations.
Recommendation:
Dakota Ofce Product uses traditional costing system where direct and
indirect costs are assigned and allocated to products and services
delivered to customers. This is better for companies where production
operations are high labor intensive and overhead costs are smaller part of
total costs. Activity Based Costing is going to be better for Dakota Ofce
Products. They will be able to calculate the cost of products and services
in accordance to the activities involved and resources consumed.
Dakota should do an analysis with all of its customers. This could identify
the customers who they would proft from the most and then they could
minimize services to the least proftable customers and concentrate on the
more proftable customers. Also if they did an analysis, they would fgure
out that the delivery cost has some issue and the price for desktop
delivery should be adjusted by the distance from the warehouse.