Wilkerson case - Considering Wilkersons competitive...

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Considering Wilkerson’s competitive environment, production processes and current accounting system. What red flags do you see which may signal that the current cost system is distorting product costs (relate these specifically to the situation at Wilkerson)? Also discuss (using Wilkerson specifics) whether Wilkerson has the three necessary conditions for ABC to be helpful. Red Flags A. 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% “unable to maximize the profit from the product sold”. They are currently being matched in quality by competitors but not volume of sales. B. Traditional Absorption Costing (TAC) Wilkerson Company is now only put the costing of direct labor and material, is not the best way to allocate overheads as the expensive and inexpensive overheads get evenly shared between the three very different products categories without relate to direct labor technologically. C. Wilkerson has one department for production where components are machined and assembled into finished goods based on customer requirements. D. They think competitors are missing an opportunity for profit in flow controllers. Moreover customers haven’t complained about price increases on flow controllers.
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This note was uploaded on 11/04/2011 for the course ACCT INFO GM-8102 taught by Professor Ramroland during the Spring '11 term at ASU.

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Wilkerson case - Considering Wilkersons competitive...

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