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......
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