Increasing the efficiency of delivery operations and customer profitability analysis with a time-driven activity-based costing model
Publication date: 2 June 2023
Abstract
Learning outcomes
Upon completion of the case study discussion, successful students will be able to define and list the steps of time-driven activity-based costing system (TDABC); understand and explain the ideas behind the TDABC; implement the TDABC in customer profitability analysis; draw connections among the cost and profitability analysis; evaluate the importance of better costing techniques in profitability analysis; and make managerial decisions based on TDABC analysis.
Case overview/synopsis
Gluten Limited’s financial affairs and operations manager, Fatih, was aware that the company was making very little profit from its operations with its biggest customer. The main reason appeared to be that it delivered its products in bulk to the main warehouses of the customer, which then distributed them to the stores. Fatih believed that products were being sent to stores late, so that their expiration dates passed quickly and they ended up being returned.
The case study documents the past year of Gluten Limited’s delivery operations with one of its biggest customers. It focuses on the effectiveness of its delivery operations and ways to increase profitability by reducing sales returns. The case dilemma involves the choices that Fatih faced following a six-month trial period: either delivering products in bulk to the customer’s main warehouses at lower cost but higher return rates or delivering small amounts directly to stores at higher cost but lower return rates. Fatih needed to decide which mode of customer operations was more profitable and continue that way.
Knowing the importance of determining costs properly in profitability analysis, Fatih made the cost calculations using the TDABC system.
Complexity academic level
This case was written for use in Cost Accounting and Managerial Accounting classes at the undergraduate level. The focus of the case aligns well with discussions of customer profitability analysis, cost reductions, eliminating non-value-added activities, and profitability of operations. Instructors seeking to emphasize the most suitable costing methods for customer profitability analysis could assign this case.
Supplementary material
Teaching notes are available for educators only.
Subject code
CSS 7: Management Science
Keywords
Acknowledgements
Funding: The authors did not receive support from any organization for the submitted work.
Conflicts of interest/competing interests: The authors have no conflicts of interest to declare that are relevant to the content of this article.
Availability of data and material: The data that support the findings of this study are available from the corresponding author upon reasonable request.
Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The authors may have disguised names; financial and other recognizable information to protect confidentiality.
Citation
Adıgüzel, H. (2023), "Increasing the efficiency of delivery operations and customer profitability analysis with a time-driven activity-based costing model", , Vol. 13 No. 1. https://doi.org/10.1108/EEMCS-10-2021-0330
Publisher
:Emerald Publishing Limited
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