Dakota Office Products Case

The company started off producing 20,000 units of mountain bikes. We did not change the production quantity. Last year our forecast sales were 24,000 when we only sold 19,866; therefore we thought it would be best to leave production at 20,000 bikes. Having excess inventory, we concluded that 20,000 units should be enough considering our quality has not changed and our advertising will not increase the sales dramatically. Although we had the choice to produce as much as 30,000 units, we felt as though we did not have sufficient money to increase production. We were interested in allocating the money towards marketing as opposed to production. We realized that without awareness, no matter how many units we make, sales would be inefficient.

Assuming that Kodak Gold Plus sells about 20% of its yearly sales during off-seasons, the resulting cannibalisation will amount to:

Owens & Minor is a distributor of surgical and medical supplies to hospitals and other health care facilities. Due to changing demand from customers, the company is facing increased operating costs, which has resulted in lower profit margins and even losses. In 1993, O&M recorded an $18 million profit, which was reduced to a loss of $11 million in 1995. The entire industry is experiencing similar difficulties. In an effort to resume profitability, O&M is evaluating alternatives to “cost-plus pricing”. Cost-plus pricing does not reflect the true cost of the services provided by O&M. Customers are demanding more of O&M while

Second, the manufacturing order costs for non-stocked items was calculated by dividing total manufacturing order costs for non-stocked items by the number of orders for non-stocked products. Non-stocked products have additional costs associated with processing orders that went above and beyond the costs associated with a stocked product. The third step involved determining what the S"A allocation factor would be for calculating the S"A volume related costs. This allocation factor would then be applied to manufacturing COGS. The fourth and final step involved the calculation of the operating profit based on backing out volume related costs from sales revenues followed by deducting S"A and manufacturing order costs from the resulting gross margin to arrive at a operating profit.

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

Pricing is a pertinent issue in procurement and acquisition in organizations. Consumers buying the commodities of an entity should get clarity on pricing related issues. There is uncertainty in Pro

v. What are the limitations, if any, to the estimates of the profitability of the two customers? (Hint: Consider what improvements could be made to the accounting system to obtain more accurate costs)

However, there are several factors for the company to choose its pricing strategy. In this case, it may be better if the company choose to sell its product at $21.50 instead of $15.50. This is due to the fact that price-cutting appears to be not a good strategy in this industry. If every player in the same industry starts to lower the price of their products, every company will end up having the low price, which in turns lead to a low profit margin. Moreover, referring to the calculation in a below table, it also implies that if the price is lower than $12, sales will not be able to cover the variable cost incurred, thus it will bring about a loss in net profit.

An organization’s pricing strategy will vary depending on multiple factors. An organization needs to understand their competition and market share, the distribution chain, and ultimate goal of customer retention. This paper will review the pricing strategies of Intuit.

2. Compares the returns of the asset to the market over a period of time (Beta)

After closely reviewing the financial and production data, our accounting team has found that your traditional cost allocation is faulty and misleading. The costs of products A and C were over allocated and products B and D were under allocated causing deceptive information on the true profits of the company. Also, product B appears to be

First, we have identified if there is really an insufficiency in the amount of selling prices set by the Sales Department, in reference to Exhibit 1 of the case. We did this through identifying the maximum amount of overhead costs that the company can incur for the three products and comparing it with the total overhead costs. See Table 1 for details.

In vertical analysis, it is easier to see elements as a percentage of Revenue. Between 2011-12, the portion that cost of sales takes in revenue has increased however, there is a bigger deterioration in distribution cost. In 2011, 9.21% of revenue remains as profit but in 2012 this figure decreases to 8.14%. Despite reduction in costs is one of the strategies of Ted Baker(part 1.4), analysis illustrates that costs increase each year.

Under the original costing system used by Dakota Office Products, Customer A is shown to be slightly less profitable than Customer B. From the calculations above, we see that Customer A is slightly profitable at 0.3% profit as a percent of sales, and Customer B is not profitable, at a loss of (7.1%). We observe that Customer A is a consumer of low-cost services and generally pay their bills within 30 days unlike customer B who took 90 days or more. Timely servicing of debt led to profitability of Customer A.

As is known, pricing is one of the most important steps for business plan which needs good research, calculations and formulations. There are different pricing strategies to put into effect due to the market and product conditions, such as premium pricing, penetration pricing, economy pricing, price skimming(Voice Marketing, 2012). These four pricing strategies are main pricing policies. They form the bases for the exercise. However there are other important approaches to pricing. These pricing strategies are: Psychological pricing, product line