Allied Office Products Case Essay

659 Words Jul 23rd, 2011 3 Pages
Allied Office Products Case Objective: This case provides practice in Activity-Based- Analysis (ABC) calculations for a service company. It also highlights the important considerations in moving from ABC to Activity-Based Management (ABM) and further into Strategic Cost Management (SCM) so as to influence customer behavior and profitability.

Q1. Using the information in Exhibit 2 calculate ABC based service costs for the TFC distribution/warehouse services. These are some broad steps that can help. 1. Step 1 – Use Distribution Center Activity Analysis in the text (p. 30) and determine the cost (activity) driver for each of the activities in page 31. 2. Step 2 – Calculate the warehouse/distribution cost per unit of
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* Should the price be raised for those who a getting a free ride or lower the price for those who are not? What would be the justification for raising the price? And or reducing the price? * Bring in the information from Exhibits 4 and 5. Does A or B represent the top or the bottom 20 accounts? Explain. What will be the impact of eliminating the bottom 20 customers? Should the discontinue providing TFC services to these customers * Should service based pricing (SBP) be implemented for all customers? If SBP is not the best option for all types of customers how should price be determined for both A and B type customers?

Q5. What advise to you have for Allied’s Management? What do you learn from Exhibit 6? * In TFC what are the real value adding service activities? * Can we tweak the value chain to improve the profitability of the current losers? * Would innovative management accounting practices (e.g., Target Costing, JIT) help? * Should Allied have moved up the value chain to provide TFC services? * Can you bring in the revolution that is going on currently in supply-chain management and logistics into understanding the dynamics of the case?

A Figure to illustrate Exhibit 2

Required: 1. Calculate the numbers for A through K and calculate $X and $Y. 2. Determine the costs of Customer A and Customer B?

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