222222222 Wilkerson Case Study Final

1476 Words6 Pages
Q#1.What is the competitive situation curently being faced by the company?
The company facing the different competitive situations between the products, gross margin of values are maintained at 35% and produce in standered.
Flow controlers are custmized products, and less competitive market power.
Pumps are comodity products produced in high voulume at high price for a market.
Wilkerson is a quality leader although his competitor also have a best match with him. Butt there is no competition in price facing by wilkerson, and there is no chances in future. So wilkerson should compete in price by analyze its overhead cost.
Pumps are commodity products, produced in high volumes for a market with high price competition - price cutting by
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Cost Pool
Amount ($)

Cost Driver
Amount
Activity-Based Cost Rate
Machine Related Expenses
336,000
Machine hours
11,200 machine hours
$30 per machine hour
Setup labour
40,000
Production runs
160 production runs
$250 per production run
Receiving and production control
180,000
Production runs
160 production runs
$1,125 per production run
Engineering
100,000
Hours of engineering work
1,250 engineering hours
$80 per engineering hour
Packaging and shipping
150,000
Number of shipments
300 shipments
$500 per shipment

Product
Valves
Pumps
Flow Controllers
Units
7500
12500
4000
Direct Labour
75,000
156,250
40,000
Direct Material
120,000
250,000
88,000
Total Direct Costs
195,000
406,250
128,000
Manufacturing Overheads

- Machine Related Expenses
112,500
187,500
36,000
- Setup labour
2,500
12,500
25,000
- Receiving and production control
11,250
56,250
112,500
- Engineering
20,000
30,000
50,000
- Packaging and shipping
5,000
35,000
110,000
Total Manufacturing Overheads
151,250
321,250
333,500
Total Cost Allocation
346,250
727,500
461,500

From this we can see that flow controllers are not contributing in a positive way as they have a negative gross margin of -9.90%. While Valves have a higher margin (46.3%) and also Pumps have a higher gross margin with 33.1%. Vales and Pumps are therefore actually much more attractive for the company than they

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