Wilkerson Co Case Solution

Case Solution

The best choice of Wilkerson, suffered with lowering profits, is fighting to understand why the business is going through severe cost competition on one items while capable of raise prices without competitive response on another items. The controller proposes the organization create a task-based cost model to understand better the different demands that each items makes round the organization's indirect and support assets. A rewritten type of a young case.

Excel Calculations

Operating Results

Product Profitability Analysis

Product Data

Monthy Production and Operating Statistics

Activity Based Costing

Acivity Cost pool and Measures

Acivity Cost pool and Cost Driver Rate

Unit Cost Of Product Line

Operating Results

Product wise Operating results

Questions Covered

What is the competitive situation faced by Wilkerson?

Given some of the apparent problems with Wilkerson's cost system, should executives abandon overhead assignment to producer entirely by adopting a contribution margin approach in which manufacturing overhead is treated as a period expense? Why or why not?

How does Wilkerson's existing cost system operate? Develop a diagram to show how costs flow from factory expense accounts to products.

Develop and diagram an activity -based cost model using the information in the case. Provide your best estimates about the cost and profitability of Wilkerson's three product lines. What difference does your cost assignment have on reported product costs and profitability? What causes any shifts in cost and profitability?

Based on the results of your activity-based cost model, what actions might Wilkerson's management team consider to improve the company's profitability?

What concerns, if any, do you have with the cost estimates you prepared in the answer to Question 4? What other information or analysis would you want for better cost and profitability estimates?

Wilkerson has been compensating salespersons with commissions on their gross sales volumes (less returns). Parker wonders whether the company should change this incentive system.