(Answered)-8. Suppose that a major customer switched from placing all its orders manually to placing all its...

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8. Suppose that a major customer switched from placing all its orders manually to placing all its orders over the internet site. How should this affect the activity cost driver rates calculated in Question 2? How would the switch affect Dakota’s profitability? 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. SOLUTION: 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%*2,400,000+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

 

Solution ID:10137767 | Question answered on 16-Oct-2016

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