Dakota Office Products

1. The reason for the company to make losses is that it is incurring costs on certain customers in excess of than what it assesses by its method of cost estimation based on general percentages. In order to find the solution, it is required to estimate the costs using ABC estimation method. Same is undertaken below.

2. The first step is to estimate the unit cost of services extended by the company on its value adding processes.

Table 1

|Sl. No |Activity |No. of operations |Cost Incurred |Ref of cost given |Unit Cost |

| | | |(USD) |in column: 4 |(USD) |

|1 |2 |3 |4 |5 |6 |

|A |Handling of cartons in Warehouse |80000 cartons |4160000 |Para 3(a) |52/ Carton |

|B |Shipping of cartons by freight |75000 cartons |450000 |Para 3(b) |6/ carton |

|C |Desktop delivery |2000 dly |440000 |Para 3(c) |220/ dly |

|D |Set up of manual order |16000 orders |160000 |Para 3(d)(i) |10/order |

|E |Enter individual lines of each |150000 lines |600000 |Para 3(d)(ii) |4/line |

| |order | | | | |

|F |Validate EDI orders |8000 orders |40000 |Para 3(d)(iii) |5 / order |

|G |General & Selling Expense |USD 42500000 of Annual |200000 |Para 3(e) |0.47% of sales |

| | |Sales | | |...