Wilkerson Company Manufactured Water Purification Equipment

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.

The week four individual paper addresses the implementation of Activity Based Costing (ABC) by Super Bakery, Inc., a virtual corporation founded by Franco Harris. Specifically, management strategies, the reasoning behind an ABC system, and the alternatives of a job order cost system or a process order cost system are assessed for this enterprise.

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?

While we are performing our analysis on different aspects of the company, we look at the three main types of cost. When we remain devoted to improving our costs, and the faults related, we show our same devotion to our consumers. This is portrayed by the quality of products we put on the shelves. Prevention costs, appraisal costs and Failure costs are areas

The week four individual paper addresses the implementation of Activity Based Costing (ABC) by Super Bakery, Inc., a virtual corporation founded by Franco Harris. Specifically, management strategies, the reasoning behind an ABC system, and the alternatives of a job order cost system or a process order cost system are assessed for this enterprise.

Wilkerson employs a Normal Cost System, which means that they use predetermined overhead rates along with actual costs for direct material and direct labor. Normal costing systems are appropriate when overhead costs are a relatively small percentage of total manufacturing costs and product diversity is limited. For Wilkerson, normal costing does not make sense. Overhead costs make up over 50 percent of total manufacturing costs and their product offering is relatively more diverse. This indicates that the current accounting system in place may be distorting costs significantly. Supporting data:

Glaser Health Products manufactures medical items for the health care industry. Production involves machining, assembly and painting. Finished units are then packed and shipped. The financial controller is interested to introduce an activity-based costing (ABC) system to allocate (or distribute) indirect costs to products. Indirect costs, as distinct from direct costs, cannot be unambiguously linked to specific products. The controller would like to calculate product costs based on ABC for planning and control, not inventory valuation.

This paper provides a brief presentation of Activity-Based Costing methodology, how is used as well as its short comings.

This diversification approach allows them to enjoy economies of scale and also economies of scope, by offering differentiated products of a similar or even in the same category to answer different customer needs. Operational efficiency logistics to reach nearly 100% first-pass line fill and expanding global presence help the company improve and expand with their customers. The acquisition of brand name products, changing in cost structure to improve operation margins to minimum of 15% and achieving critical mass protecting its shelf space at each category. Many of the retail customers will ask Newell competitors if they ship like Newell, this proves the level of customer service and efficiency that Newell reached and all these results in decrease of cost; however increase in WTP.

6.) The Wilkerson Company original case is not effective and accurate without including an ABC analysis. ABC allowed us to assess the business performance of each of its businesses including: Valves, Pumps and Flow Controllers. This enabled us to realize that the Flow Controllers business is not profitable with a Gross Margin of -11.31%. I recommend specifically solving the problem of pre-tax margin going from 10% to less than 3%. The strategic decisions that need to be made are improving the unprofitable Flow Controllers business unit, while simultaneously increasing the sales of the more profitable Valves and Pumps business units. I would capitalize on the highest margin business of the Valves. Specifically, I would develop marketing strategies on how to grow market share in this business. I would assess what we are doing in this business and I would reapply it to our other businesses. This would include evaluating and eliminating costs in the other business units,

Going into 2004, Bob Moyer planned to produce 10,000 bicycles at Mile High Cycles. Construction of his bicycles includes the utilization of three departments, frames, wheel assembly, and final assembly. During this year, Mile High Cycles ended up actually producing 10,800 bicycles to meet higher than expected demand. Bob is curious as to whether or not he was successful in maintaining costs to meet these higher levels of demand.

Weekly profits have increased from $37,800 to $45,690 when 10 units of light weight compressors are manufactured; clearly showing that it’s a financially better off move.

Being able to increase productivity and revenues has always been the greatest challenge of any manager, and the manager of RL Wolfe, a plastic pipe manufacturer, was not an exception. Because of the low-efficiency percentage RL Wolfe had in comparison to their its competitors, John Amasi, director of Production and Engineering , had no other choice then came up with a new way of improving RL Wolfe production methods.

In the midst of a global recession, Clayton Industries is challenged by a diminishing demand for their product and rising variable costs. These issues are further compounded by stiff market competition that

During the latter half of 1993, the sales of the entire industry weakened. Even though Hanson retained its share of the market, its profit for the last six months was small. In January 1994, Samra announced a price reduction on product 101 from $9.41 to $8.47 per cwt. This created an immediate pricing problem for its competitors. Wessling forecast that if Hanson Company held to the $9.41 price during the first six month of 1994, their unit sales would be 750,000 cwt. He felt that if they dropped their price to $8.47 per cwt., the six months’ volume would be 1,000,000 cwt. Wessling knew that competing management anticipated a further decline in activity. He thought a general decline in prices was quite probable.