Dakota Office Products by Robert S. Kaplan
1. Why was Dakota?s existing pricing system inadequate for its current operating environment?
2. Provide a brief analysis of the attached (page 2 of this document) activity-based costing system. Do you agree with the activities and/or cost drivers identified for each activity? Why or why not?
3. Using the activity-based costing system from Question 2, calculate the profitability of Customer A and Customer B. (Hint: This should be a relatively straightforward calculation given the ABC system in Question 2)
4. What explains any difference in profitability between the two customers? What are the limitations, if any, to the estimates of the profitability of the two customers?
5. Assume that Dakota applies the analysis done in Question 3 to its entire customer base. How could such information help the Dakota managers increase company profits?
ABC System for Dakota Office Products is discussed very comprehensively in this explanation..