ACCT7107 Two-part Case Assignment Part 2 Semester 2, 2022 Dakota Office Products (DOP) Case Assessment Questions – PART 2 (51 marks) Case Analysis 1. Answer Q1-3 by taking into account the three elements to consider in the choice of a product costing system, i.e. (1) methods of cost accumulation and assignment, (2) measurement basis, and (3) inventory valuation method. [Hint: keep in mind that DOP is a merchandiser, not a manufacturer.] Q1: What is the most suitable method of cost accumulation for DOP Provide justification to your answer. (Word limit: < 40 words; 4 marks) 2. What is the most suitable method to allocate indirect costs in DOP Provide justifications to your answer with reference to the case information. (Word limit < 100; 8 marks) 3. Is the choice of the inventory valuation method relevant to DOP’s decision on the business’ choice of a costing system Provide justification to your answer. (Word limit < 45; 3 marks) 4. Would DOP’s current chosen costing system provide accurate cost information if DOP maintains the same customer base but reduces its product range to become a single- product company (i.e., to specialise in selling only one office product) Answer “Yes” or “No”. Justify your yes/no response by explaining why cost distortion would or would not occur in the single-product scenario. [Hint: carefully consider what drives the accumulation of indirect costs in DOP.] (Word limit < 80; 5 marks) 5. Exhibit 3 identifies the ABC cost pools by indicating the appropriate choice of allocation bases. Provide the following information for each ABC cost pool: a) The total costs in the pool after the first-stage allocation but before the second-stage allocation – show full calculation if the pool contains multiple cost items. b) The quantity of the chosen allocation base to be used in the second stage allocation. For example, the costs in one of the cost pools is to be allocated by the number of cartons shipped by commercial freight. You should provide your response in relation to this pool as the parts in blue in the table below. Cost pool as identified by the chosen allocation base as per Exhibit 3 a) Total costs b) Quantity of allocation base Number of cartons shipped by commercial freight Total commercial freight costs = $450,000 Number of cartons shipped by commercial freight = 75,000 Provide your answers by completing the table provided. (7.5 marks) 6. If DOP currently operates at a level that is well below its full supply capacity and have made the decision to allocate its fixed OH costs by the average sales volume in the past five years, how would this decision impact on the business’ pricing and profitability [Hint: Consider different types of capacity concepts in relation to supply and demand.] (Word limit <100; 6 marks) 7. (a) Discuss the cost(s) and benefit(s) of introducing the desktop delivery service. (Word count < 80; 5 marks), and (b) justify whether you would or would not recommend the discontinuation of this service (Word limit < 80; 5 marks) 8. What is DOP’s current pricing method Discuss whether the current choice of pricing method is appropriate by considering DOP’s competitive environment. [Hint: If the ACCT7107 Two-part Case Assignment Part 2 Semester 2, 2022 current pricing system is not appropriate, you should suggest a suitable pricing method for DOP as part of your justification.] (Word limit < 90; 6 marks) 9. Provide one actionable recommendation to increase customer profitability in relation to Customer B. (1.5 marks)
