222222222 Wilkerson Case Study Final

3. Something is missing from the scenario. Based on his history, L.J. should have been taking an important medication. What is it, and why should he be taking it?

I. Gross profit margin ratio is 25% means that the company is much more efficient in the production and distribution of its product.

The larger group is the placed students. The table shows that this group has 133, represented as N= 133, whereas the continuing students had n=31. The number of placed students is 100 more than the continuing students.

• Net profit margin has been negative and no major patterns over the 9 year period on net profit since the trend of the industry is based mostly on economic factors, and whether or not they secure contracts. Due to high percentage of COGS they are only left with a net profit of $980 or

3.) The estimated product costs for valves, pumps, and flow controllers using ABC for overhead activities (primarily Ex. 1 & 4) and direct cost data from the Exhibits are:

1. What is the competitive situation faced by Wilkerson? The critical product in term of market competition is the pumps of Wilkerson Company. The pumps are Wilkersons major product line with a production of about 12,500 units per month. Pumps currently have the lowest gross margin among all products, because competitors had been reducing prices on pumps and Wilkerson adopted its prices in order to remain competitive and to maintain the volume. 2. Given some apparent problems with Wilkersons cost system, should executives abandon overhead assignment to products entirely by adopting a contribution margin approach in which manufacturing overhead is treated as a period expense? Our conclusion is, that they should not adopt

A typical Gross profit margin depending on the industry may be 25 to 30%. Nucor’s Gross profit margin ratio indicates that industry is intense and cost of goods is one of the main of factor in profitability. After examining the five year

Wilkerson should be aware that its competitors could start dropping the prices of their valves at which time, Wilkerson would need to

The purpose of this report is discussing the case of Wilkerson Company that confronting tough competition in price cutting in pumps which caused to a big drop of pre-tax operating income from 10% to 3%. After observing the existing costing allocation, we found out there is an issue on the existing costing report that the manager could not be able to see the real situation. In light of this, there will be brought to the discussion on the feasibility of using an alternative costing method – Activity based costing (ABC) in the latter paragraphs.

They are a small, local company that assumingly delivers quality products on time and at the convenience of their buyer’s needs. While their relationship with CJI appears to have been professional and successful, they will not be able to continue to supply CJI with all of their bilge pumps once the demand reaches 50 pumps monthly. This situation forces them to consider their options which are: to expand their production capabilities or maintain their current production levels and risk losing their business with CJI.

The company has cast its own pump housings for over 40 years. A competitor is now offering a cheaper alternative should Muenster choose to outsource pump housings. Terri, Purchasing Manager for Muenster, has learned that Union’s quote of $90 is one half the price it takes Muenster to manufacture their own pump housings. She’s proposed outsourcing but met with resistance on multiple grounds.

Under the mathematical exhibits Table 4 shows the differences between the old gross margin and the new gross margin. Therefore, this method should look more attractive to the company as well as providing more of an accurate gross margin for them. This showed that the valves and pumps are more useful and profitable than they previously thought whenever they were using the old traditional method instead of the activity based cost method. But, looking at the similarities of them both the pumps is still below the planned gross margin of 35%. The Wilkerson Company wants their gross margin to be above 35% but even using the activity cost based method it is only at 33.1%. A difference was that the old method had flow controllers being the most profitable

Also, CJI likely does not receive much of a benefit (regarding cost savings) from Heavey utilizing economies of scale because they are very small company that produces products in batches. Additionally, while CJI has been able to rely on Heavey’s expertise and product quality with regards to producing pumps, contracting their pump manufacturing has been a short-term strategy so far and with their increased production it will begin to cost

The decline in our profits has become intolerable. The severe price cutting in pumps has dropped our pre-tax margin to less than 3%, far below our historical 10% margins. Fortunately, our competitors are overlooking the opportunities for profit in flow controllers. Our recent 10% price increase in that line has been implemented without losing any business. Robert Parker, president of the Wilkerson Company, was discussing operating results in the latest month with Peggy Knight, his controller, and John Scott, his manufacturing manager. The meeting among the three was taking place in an atmosphere tinged with apprehension because competitors had been reducing prices on

Hill County operates in a very competitive market where new potential entrants can be a threat to its operation either through lower price offering or lower production cost. Competition from peer companies has significant effect on its operation, because Hill County is price taker in the market, that is, increase in prices is not one of the choices it can implement. Also, due to the fact that its profitability relies heavily on cost management, an intense competition can worsen the situation of Hill County in the future. Hence, the company needs to be very efficient in order to compete with other low-cost production firms. In addition, cost