case4- wilkerson company

8/20/2019 case4- wilkerson company

http://slidepdf.com/reader/full/case4-wilkerson-company 1/24

yPREPARED BY:

MUHAMMAD SYAHMI BIN ABD JALIL 213829

MOHAMAD FIRDAUS BIN YAHAYA 221524

SYAIMAA BINTI SAAD 221958

NORAZERA BINTI ALIAS 223915

NUR AQILAH BINTI AB AZIZ 223996

CASE 4



EXECUTIVE SUMMARY

WilkersonCompany

• President

• Controller

• Manufacturing Manager

Problem• Declining profit Margin

• Simple Cost Accounting

Plan To BeImplement

• Plan ABC

• Plan Kaizen

• Plan lean Manufacturing

213829



High

OverheaCost

!o"

Pro#it$argins

22399%



HighOverhea

Cost

•Pricing method not realisti&

• High proportion of overhead costs

• Not consider the i##erent

a&tivities performed



!o" Pro#it

$argins

The loer prices for pumps has

ire&t relationship

A big impa&t to the compan!

'roppe their pre"ta# margin

$ gross margins



High overhead costs

• The direct cost is calculated based on the

standard rate of material and labor but themanufacturing overhead cost is allocated

based on 300% of labor cost.

CAUSE

2219(8



Product Valves

($)

Pumps

($)

Flo

Co!trollers

($)

Total ($)

Units7,500 12,500 4,000 24,000

Direct Labor75,000 156,250 40,000 271,250

Direct Material 120,000 250,000 88,000 458,000

Total Direct

Cost 195,000 406,250 128,000 729,250

Overhead costs

(300% of DL) 225,000 468,750 120,000 813,750

(Actual 806,000)

Total Cost420,000 875,000 248,000

1,543,000

(Actual 1,535,250)"#%% & ($'% &%%)

'*#%% & ($'*+% &%%)

,#%%% & ($'% &%%)



Reduction of pump’s price

• Parker had seen !o alter!at-ve regarding the

competitors price, they reduce t.e pr-ces in

order to remain competitive and ma-!ta-! t.e

volume+

• Price cuts had led to declining company prots,

especially in the pump line.

• !efer E&.-/-t *.



Loss of competitive advantage

• "ince many compet-tors ere e&-sts,

Wilkerson !ot yet hold a title as a ma0or

pump suppl-er,

• Competitors al#ays tac1led -t. mar1et

pr-ce that caused the prot for Wilkerson

declined #hen they do the same thing.



A2TER3ATIVE S42UTI4322391(



CO)T

*CTI+IT,

CO)T

OB-.CT

)tep 1 / Ienti#y 0 *nalyse

•

Machine-related• Labor • Engineering• Shipment

)tep 2 / *ssign an mat&h

• Cost per machine hour • Cost per production run• Cost of Cost per shipment

)tep 3/ Total p all &ost



in the rate per nit 4 per pro&tionActualCostU!-t



v

in the rate overhea &ost by etails



Total osts

Units

346!"# $!$"##

46%"##

$"## %!"##

4###

%## & - Total osts

Actual 'rices

46(%$ ")(!# %%"(3$"

)6 )$ %#"



• Monitoring products from the moment they enter the design

phase and onward throughout their product life cycles.

• Wilkerson Company can used target costing in order to

ensure that the company achieve the planned gross margin

which 35%. Formula for target costing is:



TARGT CO!T"#G $ MART &R"C ' D!"RD &RO"T

MAXIMUMC4ST

To!" #o$ % 56&'' % ('&'' % 62&''



5IFFERE3TIATI43



$ctivity&asedCosting

221(25



Simple Cost

Accounting System

• ABC properl! divide the activit!"related costs in a

proper "ay6

• ABC divide ma%or e#penses in a more 7sti#ie

manner and hence ill present a &lear pi&tre of the

prices&

Activity-Based Costing



Cont

• ABC or's best in &omple environments( here

there are man! machines and products( and tangled

processes that are not eas! to sort out&

• Conversel!( it is of less use in a streamline

environment here production processes are

a))reviated&



Traditional *olume"Based Costing ABC Costing

Pro&t +alves Pmps lo"

Controller

s

+alves Pmps lo"

Controllers

+nit ,(-.. /0(-.. 1(... ,(-.. /0(-.. 1(...

Total Cost 2-3&.. 2,.&.. 230&.. 213&/, 2-4&0. 2//-&5,-

Planned 6ross

Margin5-7 5-7 5-7 5-7 5-7 5-7

Target Selling

Price243&/- 2/.,&38 28-&54 2,/&.5 248&-1 2/,,&-.

Actual Selling

Price

243&.. 24,&.. 2/.-&.. 243&.. 24,&.. 2/.-&..

Actual 6ross

Margin51&87 /8&-7 1/&.7 13&57 55&/7 "8&87



Traitional *BC Traitional : *BCTraitional *BC

5IFFERE3TIATI43

case4- wilkerson company

Documents