Wilkerson Company

672 Words3 Pages
Case: Wilkerson Company
In the case, we have review the allocation of overhead by using Traditional Cost Accounting (TCA) and Activity Based Costing (ABC) in a manufacturing company named Wilkerson. Through the case study, I have learnt the importance of Cost Accounting System, the principles of TCA and ABC, the advantages and disadvantage of ABC, the practical use of ABC and cost reduction using ABC.

1. Importance of Cost Accounting System.
Through the case study, I learnt that a proper Cost Accounting System is very important in a company. Without the accurate system, a company is unable to maximize the profit from the product sold. The product price might be charged too high (over-priced) or too low (under-priced). All these will
…show more content…
There are few advantages and disadvantage that I have learnt in the case study as below:
Advantage: ABC accuracy
ABC is more accurate in the cost accounting compare to TCA. With the accurate cost allocation, the company can gain more advantage in price competition in the market.
Advantage: Break down of cost by activities
During the process of ABC, activities are identified and break down with individual cost. The break down is very useful to the company to strategies the cost reduction since it will show the largest cost contributor from the operation.
Disadvantage: Cost to have ABC
The ABC need an start up investment in term of cost and resources in collecting data for the analysis hence there is a cost for the implementation of this method.

4. Practical use of ABC
During the study, I have practiced to calculate the indirect cost with ABC method on each cost driver for different products. From this, I understand that the indirect cost for different product is distributed in different ratio. For example, the cost of machining is contributing almost 75% in producing valve but it only contributing 10% for flow controller. With the info, a company can eventually calculate the more accurate allocation of indirect with respect to different product and it will help the company to set the selling price more precisely and maximize the profit.

5. Cost reduction using ABC
By understand the ABC concept and method; I have learnt that it can identify the main
Get Access