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December 27 2014 08:26
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1. Wilmont Chemical Corporation..................................................................................................................... 1

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Wilmont Chemical Corporation

Author: Brownlee, E Richard, II
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Abstract: The Wilmont Chemical Corporation produces a variety of industrial products, including a specialty
chemical called SC. The company uses an actual costing system and the LIFO inventory method. At the
beginning of each year, the companys controller estimates the total direct cost (omitting any manufacturing
overhead allocation) per unit of producing SC. Unfortunately, the market demand and selling price are difficult to
predict, as are the raw material and direct labor costs. Monthly budgets are prepared in advance, and are
subsequently compared with actual results. The controller is wondering if the companys financial statements
would be more managerially relevant if the company changed to an estimated costing system, where raw
material inventory is kept at estimated costs and finished goods inventory is kept at estimated production costs.
The case provides information for comparing the actual operating results for a month with the budgeted
amounts. Students are asked to prepare three monthly income statements: one using the companys actual
costing system; one using an estimated costing system; and, one using a hybrid costing system that
incorporates both actual and estimated costs. They are then asked to take a position as to which of the three
income statements presents the most managerially relevant information.
Keywords: actual costing standard variance analysis
Publication title: Darden Business Publishing Case Collection
Supplement: UVA-C-2207: Wilmont Chemical Corporation
Pages: 1-3
Publication year: 2004
Publication date: Sep 6, 2004
Place of publication: Charlottesville
Publication subject: Business And Economics
Source type: Reports
Language of publication: English
Document type: Business Case
ProQuest document ID: 816825304
Document URL: http://search.proquest.com/docview/816825304?accountid=145616
Copyright: Copyright Darden Graduate School of Business Administration Sep 6, 2004
Last updated: 2012-05-17
Database: ABI/INFORM Complete

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