Midwest Office Products

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

In a virtual corporation environment, I believe the ABC method to be the most ideal for accurately tracking the costs involved in manufacturing, storing, delivery, and sales. For Super Bakery, Inc. the addition of multiple outsourced companies to their processes meets the criteria of products with manufacturing complexity that requires differing degrees of support services (Kimmel, Weygandt, & Kieso, 2009, p. 876). As a result, I agree with Super Bakery Inc.’s decision to implement an ABC system.

While we are performing our analysis on different aspects of the company, we look at the three main types of cost. When we remain devoted to improving our costs, and the faults related, we show our same devotion to our consumers. This is portrayed by the quality of products we put on the shelves. Prevention costs, appraisal costs and Failure costs are areas

In a virtual corporation environment, I believe the ABC method to be the most ideal for accurately tracking the costs involved in manufacturing, storing, delivery, and sales. For Super Bakery, Inc. the addition of multiple outsourced companies to their processes meets the criteria of products with manufacturing complexity that requires differing degrees of support services (Kimmel, Weygandt, & Kieso, 2009, p. 876). As a result, I agree with Super Bakery Inc.’s decision to implement an ABC system.

Wilkerson employs a Normal Cost System, which means that they use predetermined overhead rates along with actual costs for direct material and direct labor. Normal costing systems are appropriate when overhead costs are a relatively small percentage of total manufacturing costs and product diversity is limited. For Wilkerson, normal costing does not make sense. Overhead costs make up over 50 percent of total manufacturing costs and their product offering is relatively more diverse. This indicates that the current accounting system in place may be distorting costs significantly. Supporting data:

Under an ABC system, the allocation of costs to products is achieved through at least four analytical steps. Firstly, costs are grouped into activity levels. Secondly, cost drivers are

* Loads were picked up from location A and delivered to one of 5 warehouses, placed on another truck with optimized route for location B (software driven route optimization)

One of the best aspects of the way the time-driven ABC system was put into place at Kemps was how efficiently and accurately management determined the main issues with the current cost system and responded with appropriate and relevant solutions. For example, one of the greatest problems the company was facing was that many of its operating costs were spread out equally over a customer base that was growing more diverse and demanding more personalized and varied service, effectively cutting or potentially eliminating entirely Kemps’ profit margins for a product. Therefore,

8. Using the ABC data, compute the average contribution to profit per account for both retail and business customers. What business strategy would be a manager using the ABC cost system likely adopt? How does this result compare to your response to Requirement 1, Part E?

The North American market is very price-sensitive, and some components, like OE and spares which are in the mature period of their life circle, the traditional cost system seems to be a method for them in this company. Thus, in the situation that price is almost the most important order-winning criterion. Traditional cost system is judged in that it is suitable to manufacture the required product at minimum cost and efficiency.

i. Why was Dakota’s existing pricing system inadequate for its current operating environment? (Hint: Consider why ABC might be a good idea)

An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx,

In order to analyze the success of the Fedex, it is significant to observe the financial performance of the company and compare it with the previous year. To have a clear analysis of the profitability of the company, it is vital to analyze the profit and loss statement of the company. The sales revenue of the company of the current year is $50,365 and of the previous year is $47,535. This shows that there is a rise in the sales revenue of the company of about 6.14% but does not take into account the expenses of the firm. In the current year, the operating expenses of the FedEx has also increased from $45,586 to $47,288. This shows that the cost of operating of the company increased by 3.73% which can be due to several reason such as rise in raw materials or inflation rate. But still the operating profit of the company has

with a number of strategic issues facing a capital-intensive, mature industry. Their product costing system was

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.