Case Analysis Wilkerson

1. What is the competitive situation faced by Wilkerson?

2. Given some apparent problems with Wilkersons cost system, should
executives abandon overhead assignment to products entirely by adopting a
contribution margin approach in which manufacturing overhead is treated as
a period expense? Why or why not?
3. Prepare the following calculations:
a. Calculate the unit product cost for each product using the direct-laborbased cost allocation system.
b. Calculate the unit product cost for each product using activity based
costing to allocate the cost of manufacturing overhead, as well as
profitability for each product line. Overhead cost pools include
machine, setup, receiving/scheduling, engineering support and
packing/shipping products.

4. Why have cost shifts occurred?

5. Looking only at product costs under the direct-labor-based cost allocation
system, what actions can management take to reduce product costs?
6. What actions are suggested by the ABC system?

7. Based on your analysis, what actions might Wilkersons management team

consider to improve the companys profitability?
8. What concerns, if any, do you have with the cost estimates you prepared in
the answer to question 3? What other information or analysis would you want
for better cost and profitability estimates?