Bus512 free essay sample

Identify expenses on the income statement that are sales fulfillment expenses and divide them into cost pools. a. Warehouse Expenses: * warehouse personnel expenses, warehouse expenses (excluding personnel) * order entry expenses b. Delivery Expenses: Freight, delivery truck expenses 2. Find the rate for each cost pool. Activity cost pool| Cost | Activity processed| Average Rate| Warehouse Expense| $2,000,000| 80,000| $25. 00| Order Entry Expense | Manual Order| $800,000*20%=$160,000 | 16,000| $10. 00| | Order Line| $800,000*75%=$600,000| 150,000| $4. 00| | EDI| $800,000*5%=$40,000| 8,000| $5. 00| Delivery Expense| Normal Delivery| $450,000$2,400,000*15/16| 75,000| $36. 00| | | Total $2,700,000| | | | Desktop Delivery | $200,000$2,400,000*1/16| 5,000| $70. 00| | | Total $350,000| | | 3. Given the use of each resource in the sales fulfillment cycle, determine the profitability of each customer. Company A| Company B| Activity cost pool| # of Activities Processed| Cost| # of Activities Processed| Cost| Warehouse Expense| 200| $5,000| 200| $5,000| Order Entry Expense | Manual Order| 6 | $60| 100| $100| | Order Line| 60| $240| 180| $720| | EDI| 6| $30| 0| 0| Delivery Expense| Normal Delivery| 200| $7,200| 150| $5,400| | Desktop Delivery | 0| 0| 25| $1,750| Total Cost| $12,530| $12,970| Profitability | Company A| Company B| | Current | ABC| Current | ABC| SalesCost of items purchased| $103,000$85,000| $103,000$85,000| $104,000$85,000| $104,000$85,000| Gross Margin Warehousing, Distribution and Order Entry| $18,000$12,750| $18,000$12,530| $20,000$12,750| $20,000$12,970| Contribution to general and selling expenses, and profit| $5,250| $5,470| $6,250| $7,030| | $220| $780| 4. What should Dakota do based on the information you determined? Based on the results from using Activity-based Costing, it reflected a gap between what Dakota originally perceived and a more accurate calculation of company A and B’s profitability. We will write a custom essay sample on Bus512 or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Although the gap wasn’t significant in both company’s cases, it still reflects that there’s a hole in their accounting system that will lead to a potential great loss in the future if they don’t make related adjustments. On the other hand, it also reflects that the desktop delivery service Dakota’s providing with expectation to gain more profit isn’t really to its full extent yet. With this differentiated customer service they’re providing, they should promote and encourage more usage of this shipping method with each customer to gain their profitability. Also, to fully operate the warehouse personnel on a cost and time efficient way, EDI orders should be encouraged since it’s more convenient and requires less work than manual orders. These human capitals can be re-allocated for desktop delivery to generate more revenue. Collecting bills wise, Dakota also needs to shorten the lead-time it takes for company B to pay their bills, the average account receivable balance is $30,000 while the interest of 10% is left to Dakota to pay. The accumulated affect of this difference will bring a big impact on the net profit they’re earning.