Dell 1

Dell, Inc. By: Tara Marlow BUS 640: Managerial Accounting Professor Oscar Lewis April 11, 2011

Non-proprietary standards-based technologies deliver the best value to customers – Dell can be confident in knowing they provide their customers with the best due to internal as well as external extensive research and development. 2. Lower prices to consumers. Dell provides a single point of accountability for its customers – There is no need for third party consultants to provide customer service. What business risks does Dell face that may threaten its ability to satisfy stockholder expectations? What are some examples of control activities that the company could use to reduce these risks? (Hint: Focus on pages 7-10 of the 10-K. A direct relationship is the most efficient path to the customer – Dell removes the third party by allowing customers direct access. extends superior customer value 4.Dell 2 Assignment 1 – Week 1 What is Dell’s strategy for success in the marketplace? Does the company rely primarily on a customer intimacy. Dell is the low-cost leader – Dell has a highly efficient supply chain that allows them to maintain the lowest cost structure as well as directly provide their customers with low prices. March 2005): 1. Customers can purchase custom-built products and custom-tailored services – This provides the consumer with what they desire and offers a quicker delivery/distribution than others within the same industry. Dell handles all service calls internally. 5. or product leadership customer value proposition? What evidence supports your conclusion? Dell’s strategy for success in the marketplace is a combination of their direct customer model and emphasis on standards-based technologies. 3.) . Dell has the following key tenets at the forefront of their business strategy (Dell 10-K. operational excellence. Dell relies primarily on customer intimacy to ensure marketplace success.

Dell’s net revenue could deteriorate due to U. yet the gross margin as a percentage of net revenue only increased slightly? . production and release. which can threaten satisfying stockholder expectations. the transition will take place as well as specify the impact it will have on its stockholders and consumers. this will cause a loss of revenue. According to Dell’s 10K. market share. if the local economic and labor conditions take a turn for the worse globally. where. • What are some examples of direct and indirect inventoriable costs for Dell? Why has Dell’s gross margin (in dollars) steadily increased from 2003 to 2005. The industry is very competitive and if Dell’s competitors decide to price-match or offer the same product for less. and profitability.Dell 3 Dell may face several different business risks. Dell ensures to notate when. the expectation begins to diminish. and how. • How as the Sarbanes-Oxley Act of 2002 explicitly affected the disclosures contained in Dell’s 10-K report? (Hint: Focus on pages 34-35. • Is Dell a merchandiser or a manufacturer? What information contained in the 10-K supports your answer? Dell is a merchandiser because they focus on producing the best product to the merchant’s satisfaction. 59.7). development. If the profit margin of the product. the expectation of the stockholder will begin to dissipate. Dell utilizes several suppliers to manufacture their products.) Dell’s 10-K report clearly outlines all necessary reporting stages according to the SarbanesOxley Act of 2002. and global macroeconomic trends (p. There are financial statements and all deficiencies are clearly defined. and geographic culture is substantially different. they control all aspects of research. which means there is no need for an outside manufacturer of merchandiser. customer. and 76-78. Dell’s net revenue is dependent upon international sales.S. If there was a need for change. why.

Over the period of three years. 2005 balance sheet? Why is the inventory balance so small compared to the other current asset balances? What competitive advantage does Dell derive from its low inventory levels? Page 27 of Dell’s 10-K reports a figure called the crash conversion cycle. they are allocated for its designated period and labeled as period costs. tech support. Is this a good sign for Dell or a bad sign? Why? The inventory balance on Dell’s January 28. • Describe some of the various types of operating expenses incurred by Dell. an indirect cost may have increased causing the direct costs to decrease and effect the bottom line. staff. and engineering. stock. As these operating costs are accrued or incurred. Although it is low. • What is the inventory balance on Dell’s January 28. These costs are all associated with the perspective period on the income statement. Its is not good that Dell has a negative Cash Conversion Cycle consistently. development. Although.Dell 4 Direct inventoriable costs for Dell are all costs associated with making their products. etc. extended warranties. investments. printers. the negative numbers reflect there is a disconnect between the direct labor manufacturing overhead in creating the final product. Indirect inventoriable costs for Dell are all costs associated with organization’s operation. and administrative as well as research. The cash conversion cycle for Dell has consistently been negative. monitors. . laptops. The inventory balance is smaller compared to the other current asset balances because it is based on the demand for that particular period. there was an increase. such as. 2005 balance sheet is $459. such as. Dell’s gross margin steadily increased because of maintaining balance between direct & indirect cost. Dell has a competitive advantage with low inventory because they are able to produce a custom-built product for the customer and ship within 3-5 days. general. Why are these expenses treated as period costs? Dell incurred the following as various types of operating costs selling. the gross margin as a percentage of net revenue only increased slightly. power cords. etc.

The following four cost objects for Dell are as follows: 1. Website Development Costs are indirect costs associated with the maintenance and minor enhancement to the features and functionality of its websites. Research. Shipping Costs are indirect costs associated with the geographical area in which the products are produced and shipped. 4. For each cost object. and administrative expenses. 2. Dell has to account for this cost each quarter and adjust as necessary.Dell 5 • List four different cost objects for Dell. . and Engineering Costs are direct costs associated with payroll. Warranties are direct costs associated with the production of the product because each comes with a standard manufacture warranty. 3. mention one example of a direct cost and an indirect cost. contractor fees. which is honored by Dell. Development.

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