Wilkerson Company Case Study

Chapter 18 ADDITIONAL ASPECTS OF PRODUCT COSTING SYSTEMS Changes from Tenth Edition Chapter 18 was modified to include discussions of customer-related and business-related cost drivers and recent evidence about the usage and success of activity-based cost systems. Approach Our treatment of job costing and process costing is as brief as we can make it and still get the general points across. Students do need to understand the general idea of these cost accumulation procedures; otherwise they are unable to visualize how costs are actually collected. The details, however, are appropriately left for an advanced course. The principal pedagogical problem here is how to get across the idea of equivalent production in process costing. Some introductory texts omit this idea, but this strikes us as dangerous because some student is almost sure to ask what happens in a process cost system if not all the units are completed by the end of the period. If the answer is not in the text, the instructor either has to duck the question, or attempt the difficult task of explaining it on the spot. In the text and in most problems, we assume that units are 50 percent completed as to labor and overhead. Since this assumption is widely used in practice, we see no point in complicating the text by introducing other percentages. Certainly, the most difficult part of this chapter is the section on development of overhead rates. In our experience, mastery of this material greatly reduces the omnipresent problems students have later with production overhead variances. We also find in this regard that students need to be referred back to the text section, “Why Overhead Rates Are Predetermined,” especially in later discussions of the overhead volume variance. We have placed emphasis on the flexible overhead budget to help minimize these learning difficulties. We feel that the new section on ABC provides the appropriate level of depth for a required course. Students need to