1. What caused the existing system at ETO to fail?
2. Calculate the reported cost of the five components listed in Exhibit 6 using:
a. The existing system.
b. The system proposed by the accounting manager.
c. The system proposed by the consultant.
3. Which system is preferable? Why?
4. Would you recommend any changes to the system you prefer? Why?
5. Would you treat the new machine as a separate cost center or as a part of the main test room?
Bridgeton Industries: Automotive Component & Fabrication Plant
1. The official overhead allocation rate used in the 1987 model year strategy study at the Automotive Component and Fabrication Plant (ACF) was 435% of direct …show more content…
Dakota Office Products
1. Why was Dakota’s existing pricing system inadequate for its current operating environment?
2. Develop an activity-based cost system for Dakota Office Products (DOP) based on Year 2000 data. Calculate the activity cost-driver rate for each DOP activity in 2000.
3. Using your answer to Question 2, calculate the profitability of Customer A and Customer B.
4. What explains any difference in profitability between the two customers?
5. What are the limitations, if any, to the estimates of the profitability of the two customers?
6. Is there any additional information you would like to have to explain the relative profitability of the two customers?
7. Assume that Dakota applies the analysis done in Question 3 to its entire customer base. How could such information help the Dakota managers increase company profits?
8. Suppose that a major customer switched from placing all its orders manually to placing all its orders over the internet site. How should this affect the activity cost driver rates calculated in Question 2? How would the switch affect Dakota’s profitability?
Caribbean Internet Café
1. What managerial issues should David Grant consider before starting the Caribbean Internet Café?
2. Define the fixed, variable and start-up costs in this case.
3. What is the contribution margin per