Cost Accounting Questions on Wilkerson Company Case Analysis

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Wilkerson Company 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…show more content…
By doing this the company will significantly reduce the overhead costs and will increase profitability. 6. 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? We need to perform more detail analysis of overhead cost to define the what cost is fixed and what cost is variable. Based on such analysis we can better estimate what is our fixed costs and how it would impact on the overall profitability if we abandon one of our product line. We prepared the contribution income statement for production lines Valves Sales $ 645.000,00 Pumps $ 1.087.500,00 Flow contr $ 420.000,00 $ 2.152.500,00 Direct labor costs VC Direct material costs Machine-related expenses ($ 75.000,00) ($ 120.000,00) ($ 112.500,00) ($ 156.250,00) ($ 250.000,00) ($ 187.500,00) ($ 40.000,00) ($ 88.000,00) ($ 36.000,00) ($ 271.250,00) ($ 458.000,00) ($ 336.000,00) contribution margin $ 337.500,00 52% $ 493.750,00 45% ($ 12.500,00) ($ 56.250,00) ($ 30.000,00) ($ 35.000,00) $ 256.000,00 61% ($ 25.000,00) ($ 112.500,00) ($ 50.000,00) ($ 110.000,00) $ 1.087.250,00 MOH FC Setup labor Receiving and production control Engineering Packaging and shipping ($ 2.500,00) ($ 11.250,00) ($ 20.000,00) ($ 5.000,00) ($ 40.000,00) ($ 180.000,00) ($ 100.000,00) ($ 150.000,00) General selling & administration expenses ($ 173.724,42) ($ 254.152,39) ($

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