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Allied office Products

Autor:   •  October 20, 2016  •  Case Study  •  1,264 Words (6 Pages)  •  1,129 Views

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  1. Using the information in the text and in Exhibit 2, calculate “ABC” based services costs for the TFC business.

6 ABC Cost Drivers

Storage                                        1,550,000/350,000 = $4.43 per carton

Requisition Handling                                1,801,000/310,000 = $5.81 per requisition

Basic Warehouse Stack Selection                761,000/775,000 = $0.98 per line

“Pick Pack” Activity                                734,000/697,000 = $1.05 per pick pack

Data Entry                                        612,000/775,000 = $0.79 per line        

Desk Top Delivery                                250,000/5,500 = $29.41 per delivery

  1. Using your new costing system, calculate distribution service costs for “Customer A” and “Customer B.”

  # Required:                    Total Cost

A                B                A                B

Storage                                350                700                $1,551        $3,101        

Requisition Handling                364                790                $2,115        $4,590        

Warehouse                                910                2500                $893                $2,453

Pick Pack                                910                2500                $1,365        $2,625

Data Entry                                910                2500                $719                $1,975

Desktop                                0                26                $0                $765

Freight                                                                $2,250        $7,500

                                                                        $8,893        $23,009

  1.  What inference do you draw about the profitability of the two customers?

I would assume that Allied Office Profits is making a higher margin on Customer A.  Customer A appears to follow a very standard ordering process, without additional requirements such as delivery.  This allows Allied to rapidly complete B’s orders without incurring additional costs.

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