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
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What would an ABC system look like at Wilkerson? What are the revised product costs and margins under such a system? Assumptions: We are assuming that the SG&A costs have no direct effect on the costing for each product line. SG&A was kept the same‚ whether using the original costing method or ABC costing. Calculations for ABC Costing: Machine Expense: $336‚000/11‚200 = $30 per machine hour Setup Expense: $40‚000/160 = $250 per setup Engineering Expense: $100‚000/1‚250 = $80
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1. Wilkerson company ‘s major productions are pumps‚ valves and flow controllers. Pumps: The competitors had been reducing prices on pumps. Since pumps were a commodity product‚ the company matches the reduced prices to maintain volume. However‚ it has dropped pre-tax margin to less than 3%. Valves: Although several competitors could match its quality‚ none had tried to gain market share by cutting price‚ the gross margin had been maintain at standard 35%. Flow controllers: There was much more
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Wilkerson Company 1. What is the competitive situation faced by Wilkerson? The critical product in term of market competition is the pumps of Wilkerson Company. The pumps are Wilkersons major product line with a production of about 12‚500 units per month. Pumps currently have the lowest gross margin among all products‚ because competitors had been reducing prices on pumps and Wilkerson adopted its prices in order to remain competitive and to maintain the volume. 2. Given some apparent problems with
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related to Wilkerson Company‚ which is a manufacturer of a few products supplied to manufacturers of water purification equipment. The three products they manufacture are: 1. Valves- high quality and highest tolerances in the industry; this product is what the company started from. 2. High-volume pumps- quickly became a major supplier of pumps; they manufacture and spend more machine hours on producing this product 3. Flow controllers- most unique and highest selling product. Wilkerson Company would like
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Costing Responsibility Centres and Products Case Study: Wilkerson Company Lessons learned from this topic and case study: 1. Managers need to be able to estimate the costs of different responsibility centres and products to assist with monitoring the performance of different departments and also to assist with decision making about product pricing‚ profitability of individual products‚ assist with decisions when making changes to product lines and various other managerial requirements such
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F&B Integrated REA Diagram This integrated REA diagram combines 4 individual cycles together‚ Revenue cycle indicated in blue shape‚ Expenditure cycle indicated in green shape‚ Production cycle indicated in red shape and Human Resource cycle indicated in orange shape. There are 4 integrated resources divided into 2 types which are tangible and intangible. Tangible resources include ‘Inventory (Raw material)’ ‚ ‘Inventory (Finished goods)’‚ ‘machine&equipment’ and ‘Cash’. Only intangible resource
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1. Describe in words how costs are assigned in the Wilkerson’s current costing system. Discuss the pros and cons of this system. Wilkerson uses a simple traditional cost accounting system in which each unit of product is charged for direct material‚ direct labor and overhead costs. Material cost is based on the prices paid for component under annual purchasing agreements. Labor cost is charged to products based on the standard run times for each product. Labor rates‚ including fringe benefits
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PART I Introduction “Living in a semi – urban is indeed difficult where prices of the goods are too high especially when you don’t have money” said Mrs. Rosanie S. Surban‚ 33 years old‚ married with two children‚ currently working as secretary in LGU‚ Barangay 5‚ San Francisco Agusan del Surand whose husband is Mr. Ariel S. Surban‚ a plain househusband. Mrs. Surban has salary of at least P8‚000 per month and her husband is earning nothing. Her salary cannot suffice their household expenses
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2.3 Ishikawa diagram In 1960s‚ Professor Kaoru Ishikawa has introduced Ishikawa diagram. This diagram also called fishbone diagram or cause and effect diagram (Ishikawa 1976). Since this diagram is inception‚ it has gained tremendous of popularity to identify the root cause of the variety of problems (Hossen et al. 2017). Besides that‚ Ishikawa diagram often called as fishbone diagram is because it can help in the brainstorming to determine the possible cause of a problem and also sort the ideas
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