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  • Group 11 - Section A - Wilkerson Company - Case Submission

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    The document is a case submission for Wilkerson Company that includes: 1) An analysis of the company's break-even point for multi-products using a weighted average contribution approach. 2) Insights from ABC costing that certain products like flow controllers are incurring losses instead of profits. 3) A recommendation to adopt ABC costing instead of traditional costing to properly assign overhead costs based on activities for each product. 4) An explanation that cost shifts occurred because overhead costs were not allocated proportionately based on production volume for each product.

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    The document is a case submission for Wilkerson Company that includes: 1) An analysis of the company's break-even point for multi-products using a weighted average contribution approach. 2) Insights from ABC costing that certain products like flow controllers are incurring losses instead of profits. 3) A recommendation to adopt ABC costing instead of traditional costing to properly assign overhead costs based on activities for each product. 4) An explanation that cost shifts occurred because overhead costs were not allocated proportionately based on production volume for each product.

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    10 views3 pages

    Group 11 - Section A - Wilkerson Company - Case Submission

    Uploaded by

    peacock yadav
    The document is a case submission for Wilkerson Company that includes: 1) An analysis of the company's break-even point for multi-products using a weighted average contribution approach. 2) Insights from ABC costing that certain products like flow controllers are incurring losses instead of profits. 3) A recommendation to adopt ABC costing instead of traditional costing to properly assign overhead costs based on activities for each product. 4) An explanation that cost shifts occurred because overhead costs were not allocated proportionately based on production volume for each product.

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    © All Rights Reserved
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    of 3

    Wilkerson Company

    Case Submission

    Submitted By: Study Group No.11, Section-A


    ABDUL WAHID M (P22001)
    ABHISHEK MANI (P22002)
    RAKSHIT YADAV (P22051)
    RITUJA CHANDRAKANT GAGARE (P22052)
    SRIYAM GHOSH (P22062)
    VAISHNAVI KANUNGO (P22065)
    Wilkerson Company

    1. How do you interpret the break-even point for Wilkerson company for multi-
    products (BEP calculations provided in the excel for reference)?

    In the BEP analysis, we have determined the weighted average of contribution as there are
    multiple products. Contribution per unit for the pumps is highest and lowest for flow
    controllers.

    2. What does the ABC product cost and profit calculations reveal?

    Through ABC analysis, we can see the profit of valves is 46.32% instead of 34.88%; the
    profit of pumps is 33.1% instead of 19.54%, which is fine. However, in the flow
    controllers, they are incurring a loss of 9.88% instead of a profit of 40.95%.

    3. Given some of the apparent problems with Wilkerson’s cost system, should
    executives abandon overhead assignment to products entirely by adopting a
    contribution margin approach in which manufacturing overhead is treated as period
    expense (specific to a period)? Why or why not?

    We should adopt ABC costing instead of traditional costing methods as it assigns costs
    to the products on the basis of activities done. As we have multiple products, we can
    assign weights to the products to assign costs and thereby determine much can be allocated
    to the respective products.

    4. Why have the cost shifts occurred?

    Overhead costs are not in proportion to the volume of products manufactured, and it leads
    to wrong decisions by the management. ABC costing helps in finding a correlation
    between the overheads and the number of units produced. Earlier, the company was not
    allocating the cost on the basis of activities, hence the shift.
    5. Based on ABC analysis, what actions might Wilkerson’s management team consider
    to improve the company’s profitability?

    The management team can increase the prices of flow controllers as it is making losses, as
    seen in the ABC analysis.

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