Activity based management - part 3
Taught by Nick Drape · AI tutor support included
You'll learn how direct product profitability (DPP) applies activity-based costing principles in the retail sector to reveal the true profit on each product line.
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In this lesson
- 0:00 Direct product profitability explained
- 1:51 DPP definition and methodology
- 2:47 Calculating DPP step by step
- 5:08 Fresh salmon vs tinned soup example
- 8:34 Interpreting DPP results and decisions
- 9:31 Identifying relevant costs for DPP
- 13:01 Activity-based management recap
About this lesson
This lesson shows you why gross profit alone misleads retailers, and how to factor in hidden costs like warehousing, transport, and shop floor expenses to make better pricing and product range decisions. Through practical supermarket examples—comparing fresh salmon to tinned soup—you'll see how DPP analysis transforms strategic decision-making. This technique is essential for understanding product true profitability beyond the initial margin, helping you identify which products genuinely drive profit and which drain resources through operational complexity.
Duration: 15m
Transcript
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