Operations Management

Implementing the Activity

Base Costing System:

A Case Study on Dakota

Ofce Supply

Betty W. Steadman

OVERVIEW

Activity Based Costing (ABC) is an accounting method that allows an orga-

nization to determine actual costs associated with each product and/or service

produced by the organization without regard to the organizational structure

or other extraneous function. For Dakota Oce Products (DOP), its exist-

ing costing system was inadequate because it is incapable of accounting for

even all of the known costs such as the desktop delivery service as well as hid-

den costs such as the 10% DOP paid to maintain its working capital line

of credit for accounts receivable (Kaplan, 2003, p.4). Since ABC is a pow-

erful tool for measuring performance, ...