...MEMORANDUM DATE: February 10, 2015 TO: John Malone, General Manager Dakota Office Products FROM: ------------------------------------------------- RE: Analysis of Dakota Office Product Cost Accounting System and Recommendations As requested, we have evaluated the accounting practices of Dakota Office Products (DOP), and have reviewed the current cost accounting system along with customer examples. Based on our evaluation, we have reached the following conclusions: 1. The current cost accounting system is not accurately allocating costs 2. Desktop delivery pricing should be increased and EDI orders should be encouraged The remainder of the memo explains the basis of our conclusions. The analysis is structured into three parts: 1) Current System 2) Costs and Profitability 3) Management Recommendations Current System Dakota Office Product’s current cost accounting system is inadequate since it does not allocate expenses properly based on services rendered. The system does not take into account the differences between transactions and the applicable costs associated with each transaction. Moreover, a flat markup of 15% does not sufficiently cover the company’s expenses, and has incorrectly led management to believe they were making a profit. Thus, the current system is flawed since DOP is losing money even though they had an increase in sales year over year. Costs and Profitability We reviewed the two (2) customer examples and provided...
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...To: Mr. John Malone From: Mr. John Doe CC: Ms. Melissa Dunhill Mr. Tim Cunningham Re: Dakota Office Products Dakota Office Products (DOP) is concerned with the most recent financial statement results after realizing an apparent yearly loss. This is the first loss in the company’s history, which is alarming to management and operations. The income statement, provided in Appendix I, indicates that DOP suffered a net profit before taxes of -1.3% in the year 2000. This memo is in direct regards to the inadequacies of the existing cost allocation system and investigation of using an Activity Based Costing (ABC) method. Dakota Office Products utilizes a traditional cost allocation system. Direct and indirect costs associated with operations are allocated to sold goods. DOP offers a comprehensive product line in office supplies. Traditional cost systems used in such product diversity can cause cost distortions (Martin). Costs were allocated using the activity based costing method to determine where these distortions originate. Six activities were detailed and the ABC driver rate was calculated using the actual cost from the income statement and employee determined capacities (Appendix I). DOP has recently implemented a new convenience to customers with “desktop deliveries”. Warehouse personnel and a small fleet of trucks were assigned to complete the deliveries for the customer at only a 2% premium. When calculating the ABC cost rates, it was immediately evident that the...
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...1. Why was Dakota’s existing pricing system inadequate for its current operating environment? - profits only when clients placed large orders for cartons - real drop of profit if many clients place small orders - wrong cost determination for individual customers - wrong cost determination for new services provided by DOP (to small charges for the “desktop” delivery, then the actual cost of it) 2. Develop an activity-base cost system for Dakota Office Products based on Year 200 data. Calculate the activity cost-driver rate for each DOP activity in 2000. Activity cost-driver rates: Activity One: process cartons in and out of the facility Rate=(90% of Warehouse Personnel Expense + Cost o Items Purchased)/cartons processed Rate=(90%*2,400,000+35,000,000)/80,000=464.5 $/per carton Activity Two: the new desktop delivery service Rate=(10% of Warehouse Personnel Expense + Delivery Truck Expenses)/desktop deliveries Rate=(10%*2,400,000+200,000)/2000=220 $/per carton Activity Three: order handling Rate=( Warehouse Expenses + Freight)/ number of orders Rate=(2,000,000+450,000)/(16,000+8,000)=102.08 $/per order Activity Four: data entry Rate=Order entry expenses/Order lines Rate=800,000/150,000=5.3 orders/per line 3. Using your answer to question 2, calculate the profitability of Customer A and Customer B. Activity One: process cartons in and out of the facility –> Number of cartons ordered Activity Two: the...
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...Case Study: Dakota Office Products 1) Identify expenses on the income statement that are sales fulfillment expenses and divide them into cost pools. * Warehouse Expenses: includes personal and non-personal expenses related processing cost within the facility * Desktop Truck Expenses: includes personnel and delivery truck expenses related to performing desktop delivery functions. * Commercial Delivery Expenses: includes freight cost * Order Entry Expenses: includes manual order setups, order entries by line item, and EDI/Internet order validation functions 2) Find the rate for each cost pool. Cost Pool | Total Cost | Allocation % | Allocation $ | Activity Units | Cost Rate $ | | | | | | | Warehouse Pool | | | | | | Personnel (*) | $2,400,000 | 90% | $2,160,000 | 80,000 | $27 | Non-Personnel | $2,000,000 | 100% | $2,000,000 | 80,000 | $25 | Total Warehouse Pool | $4,400,000 | | $4,160,000 | | $52 | | | | | | | Desktop Delivery Pool | | | | | | Personnel Expenses | $2,400,000 | 10% | $240,000 | 2,000 | $120 | Delivery Truck Expense | $200,000 | 100% | $200,000 | 2,000 | $100 | Total Desktop Delivery Pool | $2,600,000 | | $440,000 | | $220 | | | | | | | Commercial Freight Pool | $450,000 | 100% | $450,000 | 75,000 | $6 | | | | | | | Order Entry Pool (**) | | | | | | (1) Manual Order Setup | $800,000 | 20% | $160,000 | 16,000 | $10 | (2) Order Line Entry | |...
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...i. Why was Dakota’s existing pricing system inadequate for its current operating environment? (Hint: Consider why ABC might be a good idea) It is evident in the Dakota Office Products case that there is a wide variety of product created by Dakota that is shipped to their customers. That, paired with the fact that there are high overhead costs related to the desktop delivery option, also tells the reader that an incorrect accounting system is currently being used. One needs only to look at the profitability difference between Customer A & B. Currently, there is no difference in the way that the size of orders are priced. In their current system, only the larger orders create a profit for the customer. ii. Develop an activity-based cost system for Dakota Office Products (DOP) based on Year 2000 data. Calculate the activity cost-driver rate for each DOP activity in 2000. The four activity cost-driver rates can be calculated as follows (show in question ii workings): * Process Cartons in and out of the facility = ((%of warehouse personnel X total warehouse personnel expense) + cost of items purchased) / number of cartons processed. * Desktop Delivery Service = ((% of warehouse personnel X total warehouse personnel expense) + Delivery truck expenses) / number of desktop delivery cartons * Order Handling = (Warehouse expenses + Freight costs) / (Manual Orders + EDI Orders) * Data Entry = Order Entry Expenses / Order Lines iii. Using...
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...Dakota Office Products Case 1. Why was Dakota’s existing pricing system inadequate for its current operating environment? Some problems with the current operating environment include: * Profits only when clients placed large orders for cartons * Real drop of profit when many clients place small orders * Wrong cost determination for individual customers * Wrong cost determination for new services provided by DOP Dakota Office 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 Office Products. They will be able to calculate the cost of products and services in accordance to the activities involved and resources consumed. 2. Develop an activity-based cost system for Dakota Office Products (DOP) based on Year 2000 data. Calculate the activity cost-driver rate for each DOP activity in 2000. Activity cost-driver rates: Activity One: process cartons in and out of the facility Rate=(90% of Warehouse Personnel Expense + Cost of Items Purchased)/cartons processed Rate=(90%*2,400,000+35,000,000)/80,000= $464.5 /per carton Activity Two: the new desktop delivery service Rate=(10% of Warehouse Personnel Expense + Delivery Truck Expenses)/desktop deliveries Rate=(10%*2...
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...Nedim Halilagic Prof. Ermin Cero ACCT 306 December 10, 2013 Dakota Office Products Dakota Office Products (DOP) is a regional office supply company with a strong reputation for customer service and quality supplies. Additionally, DOP is unafraid to adopt new service operations such as its “desk top” delivery option which delivered smaller orders directly to individual sites as we all as its traditional commercially delivered mass orders to customer distribution sites (Kaplan, 2003, pp.1-2). Additionally DOP deployed an Electronic Data Interchange (EDI) solution in order to ease data and payment transfer from and to customers as well as building a customer website that acts an order and account interface for its customers. Together these initiatives all expanded DOP’s customer service and quality metrics but also came with a cost which the company had difficulty identifying. While exact costs were difficult to ascertain for DOP it is clear that the company is incurring expenses in a manner that it previously had not since its EBIT (earnings before interest & taxes) for fiscal year 2000 revealed a -1.3% loss (Kaplan, 2003, p.4). 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 inefficiencies were in its operations. Its existing costing system was inadequate because it...
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...TABLE OF CONTENTS Pages Executive Summary1 Review of Facts2-3 Issues4 Analysis5-6 Conclusions/Recommendations7-8 EXECUTIVE SUMMARY This case is about how a company should allocate costs. Mr. Delaney is the owner of an automobile dealership that is profitable but not profitable in the area of the body shop department.. The predicament that he faces is that he needs to figure out how to allocate the costs among his different profit centers. One of the things that Mr. Delaney did in trying to assist himself was to hire a consultant. The consultant was one that is very competent in analyzing the issues of cost, both fixed, variable and semivariable. He then tried to relate his knowledge to help Mr. Delaney in his dilemma. Mr. Delaney decided that he wants to provide a high quality product to his customers. He wanted the consultant to further assist him in his analysis by finding out more about his competitors and the prices they charged. The consultant made suggestions that included leasing the body shop to another party, liquidating it, and increasing prices but Mr. Delaney decided that profit is not his main focus at this time. REVIEW OF FACTS This case is about an auto dealership owned by Frank Delaney. This auto dealership included all the operations and "profit centers" of a normal GM dealership. They sold new and used cars, had a parts and service department, and was also involved in rental and leased vehicles. Mr. Delaney hired a consultant...
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...1. Why was Dakota's pricing system inadequate for its current operating environment? Currently, DOP's pricing system is pricing products by adding markup twice, which is marking up the purchased product cost by around 15% to cover the cost of warehousing, distribution, and freight. Then add another markup to cover the approximate cost, for general and selling expenses, plus an allowance for profit. We found that the existing pricing system is inadequate regarding to following points: The current pricing system use cost-plus method, it determines the mark-ups at the start of each year, based on actual expenses in prior years, the general industry condition and competitive trends. Costs continue to rise for customers at normal circumstances which may due to various external reasons like inflations, economic situations etc. The current costing system could not cope with the highly competitive market, and the inflation will make the costs keep increasing to a level that the selling price might not able to cover it. It is because the selling price in based on actual expenses in previous years, while the expenses would still go up with the general inflation. They only charge a small price premium (up to additional 2% markup) to the new desk top delivery. The new service did attract new customers but the inadequate mark-up of 2% for desktop delivery could not cover the costs of providing the service. If clients utilizing desktop delivery place smaller orders it has a negative...
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...Greenlight Accounting, LLC [pic] Executive Summary Thorough documentation for individual and small firms is an essential element in financial record keeping and tax filing. Personal income from investments, land, compensations, employment, dividends, and interest can sometimes be an over burdensome task for an individual or family to manage and keep track with throughout the year. For businesses, it’s imperative all transactions be logged with accurate bookkeeping and that taxes stay filed in a timely manner to ensure the efficiency of the organization remains intact. Greenlight Accounting is that face-to-face, personal touch and military friendly accounting firm ready to assist with the most miniscule task associated in the process for all Federal, State and local compliances at low affordable and comparable rates. Expanding this one step further is the benefit of green accounting, which is also a service we will be providing, but one that is considered fairly new to the business world, as well as the accounting arena. Table of Contents I. Background and Green Marketing Product Strategy 4 II. Objectives, Pricing, and Goals 5 III. Strategic Plan 5 IV. Marketing Strategy 7 V. Competitive Analysis 9 VI. Customer Analysis 10 VII. Selling Tactics 10 VIII. Evaluation 11 IX. Conclusion 11 References 12 ...
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...they willing to risk their health for wealth? That is the question on everyone’s mind in North Dakota right now. North Dakota residents are scratching their heads and asking, “is the money that oil and gas development is providing to our state important enough that we are willing to risk the health of our families”? Why is there a risk? Because the oil companies are not satisfied with reaching oil only a few hundred feet below the surface. Oil and gas companies are interested in retrieving the oil and gas from a layer of shale and dense rocks at depths of 10,000 feet. The oil companies are retrieving the oil and gas from the shale and rock using a method known as hydraulic fracturing (fracking). This method was developed over 60 years ago. The process of fracking injects water, sand, and chemicals through a cement casing or tubing into shale and dense rocks, cracking the shale and rocks to open the pores, allowing the oil and gas to flow more freely to the surface (Svoboda). Even though the oil companies are using less invasive chemicals, leaving behind fewer toxins, they are still using chemicals with health risks attached such as ethylene glycol. The other health concern today is the dumping of wastewater that comes from the fracking process. There were more than 1,000 reported spills or illegal dumps of wastewater and other drilling fluids in 2011, just in the state of North Dakota. This contaminated water has to go somewhere, and it is likely going into our groundwater, killing...
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...MITCH SCHUFLETOWSKI PO Box 11021 Fargo, ND 58106 701-318-7480 mschufletowski1@hotmail.com EDUCATION BS Information Technology Management Network Administration Rasmussen College, Fargo, ND AAS Architectural Drafting and Estimating Technology North Dakota State College of Science, Wahpeton, ND AAS Construction Management Technology North Dakota State College of Science, Wahpeton, ND SKILLS * * Server+ Certification * Project+ Certification * Network+ Certification * A+ Certification * VMWare VTSP,VTSP-SV, VOP, VSP * Cisco Certified Network Training * Crystal Reports Level I & II Training * Certified Fiber Optics Technician * NIMS 100,700 & 800 * Windows Servers * VMWare 5.2- 6.0 * VSphere * Citrix Zen Server * Active Directory * Exchange 2003/2010 * AutoCAD * MAC OS * SharePoint * Office 2013 * Linux Red Hat * Front Page * Cobol * Turbo C * Microsoft Visual 6.0 * C+ and C # * UnixVB.Net * HTML, JAVA and Perl * MS 2000/XP Client * SQL Server and MySql * Brocade * Cisco Network Systems * Extreme Network Systems * Netgear Network Systems * Sky Pilot Networks * Cisco Merauki, Selinux * Apache * Verbal and Written Communications * Customer Service EXPERIENCE Sr. Network Engineer ...
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...Dakota Access Pipeline For many political and environmentally significant reasons I am against the Dakota Access Pipeline. For instance, our president Donald Trump has had stocks in the pipeline, and sold them off last summer to avoid a conflict of interest. However, the chief executive Kelcy Warren, of the pipeline company, Energy Transfer Partners (ETP), has made generous contributions to his political campaign. It appears Trump deliberately made the stocks for this company soar (Mufson, 2016). Secondly, the pipeline runs through sacred land according to the Sioux tribe and there are concerns it will contaminate their drinking water (Worland, 2016). Many protesters were arrested for their diligence in standing with the Sioux tribe in Standing...
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...Mount Rushmore is a national monument in the Black Hills of South Dakota, which has become a big tourist attraction. It has a history that not everyone knows, which makes it unique from other United States monuments. Some common questions people have are why was a huge carving placed on a mountain in South Dakota, who carved it, and how did they choose which four presidents would be on it? In the 1920's a historian by the name of Doane Robinson had an idea to carve historical figures into the granite “Needles”, which was the tallest mountain in South Dakota to attract more people to visit the state (Smithsonianmag.com). Robinson located a sculptor named Gutzon Borglum, but when he came to look at the site called “needles” he felt that...
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...QUALIFICATIONS ▪ Trained in basis computer skills ▪ Proven supervisory abilities, deal equitably with all levels ▪ Six years of Nuclear Security/Protection Level 1 Assets ▪ Involved in over four Nuclear inspections received excellent rating ▪ Adapt easily to new concepts, adept at handling multiple responsibilities ▪ Basic college classes and U.S. Air Force professional security training PROFESSIONAL EXPERIENCE 2002 – Present United States Air Force Security Forces Member Minot AFB, North Dakota ▪ Controlled entry into a weapon storage area for nuclear weapons ▪ Monitored alarms ▪ Trained/assisted members in nuclear security training ▪ Performed various other functions including standing watch, serving as classified control custodian, and clerical and editorial duties ▪ Performed administrative duties in Special Security Office at Minot AFB Iraq ▪ Served as Military driver on Mobile VACIS ▪ Performed base perimeter security ▪ Acted as Squad Leader ▪ Rewarded from Senior Leadership ▪ Directed search of incoming/outgoing vehicles RAF Lakenheath, England ▪ Provided security for Protection...
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