Wilkerson company

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.

Beginning in 1926, EMW had used a product costing system. This system assigned material and labor costs directly to the products and divided overhead costs into three categories: material related, production related, and support related. Material-related overhead

Marketing is challenging for Wilkerson because they are no longer holding a competitive advantage in the valve product line, nor are they price leaders in the pump line.

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.

| allocates overhead to multiple activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.

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,

The Wiethoff Company has a contract to produce 10000 garden hoses for a customer. Wiethoff has 4 different machines that can produce this kind of hose. Because these machines are from different manufacturers and use differing technologies, their specifications are not the same.

To develop a strategy for WMC’s Detroit plant that is no longer viable because of underinvestment, labor issues and product-process mismatch. This has lead to negative return on assets, high burden rate (6.00) and low sales figures. The report investigates the issues causing the situation. A recommendation to address the Detroit plant will be made based on the findings.

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 Watts Brothers Farming and processing units are set up to take advantage of both cost and market

And also this phase includes activity analysis and cost structure analysis. Activity analysis within ABC evaluates resource consumption through the identification of activity. Activity analysis provides information on what work is done, how work is done, quality of the work, time to perform the work, output of the work, patient and/or supplier relationships, and service relationship. Cost structure analysis After the activities were analyzed, the recorded activities were aggregated into activity centers, known as cost pools or cost centers, and the costs were calculated ( John, 1992) .

When it comes to any business, company, or firm there will always need to be some way or system that they use to see and calculate how they are doing cost wise. Some companies think that production is going because of the system that is being used. But in reality a company can either be undercosting or overcosting their total cost that they should be using for a job that they produce. If a company doesn’t break down everything they will never really know if the system is hurting or benefiting the company. So when it comes to companies that are in a competitive market, Activity-based costing system (ABC system) would be best for the company to use. The ABC system is a costing method that helps identify the activities and then assigns the cost of each activity with resources to all products and services according to the actual consumption. This means that ABC system will give you a more accurate amount of costs that are being used for each activity. This summary report will outline functions when ABC is implemented, pros, cons, and comparing the ABC system other methods to give you a better understanding of how it works and how it can benefit a company.

As we shall see in later chapters, the ability to predict how costs respond to changes in activity is critical for making decisions, controlling operations, and evaluating performance. Three major classifications of costs were discussed in this chapter—variable, fixed, and mixed. Mixed costs consist of variable and fixed elements and can be expressed in equation form as Y = a + bX, where X is the activity, Y is the cost, a is the fixed cost element, and b is the variable cost per unit of activity.

This review will discuss the issues currently faced at a chemical pump manufacturing plant in Plymouth, UK. The plant currently suffers from various issues such as poor product quality, late delivery and lack of communication from suppliers and frequent breakdowns of machinery. These issues have resulted in customers not wanting to place long term repeat orders with the company. It is expected that the literature being reviewed will provide short term and long term solutions that can be implemented successfully to turn the loss making manufacturing plant into a profitable one.