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Dakota Office Products Study Case
 
 
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 new desktop delivery service –> Number of desktop deliveries
Activity Three: order handling –> Number of orders (manual + EDI)
Activity Four: data entry –> Number of line items ...
 
 
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Starbucks coffee

The Starbucks coffee shop on Sixth Avenue and Pine Street in down Seattle sits serene and orderly, as unremarkable as any other in the chain bought 15 years ago by entrepreneur Howard Schultz. A little less than three years ago, however, the quiet storefront made front pages around the world. During the world Trade Organization talks in November,1999,protester flooded Seattles streets, and among their targets was Starbucks, a symbol, to them, of free-market capitalism run amok, another multinational out to blanket the earth. Amid the crowds of protesters and riot police were black-masked anarchists who trashed the store, leaving its windows smashed and its tasteful green-and-white dcor smelling of tear gas instead of espresso. Says an angry Schulz: Its hurtful. I think people are ill-informed. Its very difficult to protest against a can of Coke , a bottle of Pepsi, or a can of Folgers. Starbucks is both this ubiquitous brand and a place where you can go and break a window...

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