Wilkerson Company - Solution Part 2

Overhead Absorption
At Capacity
Activity Total Cost Cost Cause of the Overhead Overhead
Indirect Hierarchy Allocation Cost Activity cost Activity cost
Cost Pool Category At Capacity allocaiton allocaiton
Rate Unit
Exhibit 1 (Exhibit 4) Case facts
1 2 3 4 5 6 = 2/4 7

Machine Components 3,36,000 Batch 12,000 Machine Hours 28 per machine hour

Set up Machine 40,000 Batch 180 Productin Runs 222 per batch

Receiving/ Scheduling Components 1,80,000 Batch 180 Productin Runs 1,000 Per order

Packaging and Shipping 1,50,000 Batch 400 Shipments 375 Per Shipment

Engineering Services 1,00,000 Product Sustainance 1,250 engg. Hrs 80 Per Engg Hr Usage

Total Over Head 8,06,000

Activity Based Cost At Capacity

Valves Pumps Flow Cntrlrs Avlbl Cpcty Total Cpcty

Production Units 7,500 12,500 4,000
Machine Hours 3,750 6,250 1,200 800 12,000
Production runs 10 50 100 20 180
Number of shipments 10 70 220 100 400
Hours of engineering work 250 375 625 - 1,250

Direct Expenses
Direct Labor Expenses 75,000 1,56,250 40,000 2,71,250
Material Expenses 1,20,000 2,50,000 88,000 4,58,000
Manufacturing Overhead
Machine expenses 1,05,000 1,75,000 33,600 22,400 3,36,000
Setup Labor 2,222 11,111 22,222 4,444 40,000
Receiving/ Scheduling Components 10,000 50,000 1,00,000 20,000 1,80,000
Packaging and Shipping 3,750 26,250 82,500 37,500 1,50,000
Engineering Services 20,000 30,000 50,000 - 1,00,000

Direct Labour Units 10.00 12.50 10.00 Exhibit 2

Direct Material Units 16.00 20.00 22.00 Exhibit 2
Manufactuing Overhead (ABC) at actual production
Machine expenses Machine Hours 14 14 8.4
Setup Labor Prodn Run 0.30 0.89 5.56
Receiving/ Scheduling Components Mtly Spmts Units 1.33 4.00 25.00
Packaging and Shipping MC hr Usage 0.50 2.10 20.63
Engineering Services 2.67 2.40 12.50

Total Indirect Cost per Unit $18.80 $23.39 $72.08

Total Cost Per Unit $44.80 $55.89 $104.08

Actual Selling price $86.00 $87.00 $105.00

Actual Profits $41.20 $31.11 $0.92
Actual margin % 47.9% 35.8% 0.9%