wilkerson company full report

7/24/2019 Wilkerson Company Full Report

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BKAL 3063 INTEGRATED CASE STUDY

GROUP E

(BRIEF CASE REPORT: WILKERSON COMPANY)

NAME:

Nur Fatihah Binti Zainal Lim 221536

LECTURERS NAME:

PN ROHANA @ NORLIZA BT YUSSUF

SUBMISSION DATE:2 O!TOB"R 2#15

Exec!"#e S$$%&':

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$il%&r'(n i' a )(m*an+ that 'u**li&, *r(,u)t' t( manu-a)tur&r' (- .at&r *uri-i)ati(n

&/ui*m&nt0 Th& *r(,u)t' that 'u**li&, + th& $il%&r'(n )(m*an+ ar& *um*' -l(. )(ntr(ll&r'

an, al&'0 Pum*' ar& )(mm(,it+ *r(,u)t' *r(,u)&, in hi4h (lum& -(r a mar%&t .ith hi4h

*ri)& )(m*&titi(n0 Th& *ri)& )uttin4 + th& )(m*&tit(r' l&, t( a ,r(* (- $il%&r'(n' *r&ta7

mar4in t( un,&r 38 4r('' mar4in (n 'al&' -(r *um* 'al&' ha' -all&n &l(. 2#80 Fl(.

)(ntr(ll&r' ar& )u't(mi9&, *r(,u)t' '(l, in a l&'' )(m*&titi& mar%&t .ith in&la'ti) ,&man,

at th& )urr&nt *ri)& ran4&0 :al&' ar& 'tan,ar, *r(,u)&, an, 'hi**&, in lar4& l(t' an, 4r(''

mar4in ha' &&n maintain&, at 3580 $il%&r'(n' &7i'tin4 )('t '+'t&m i' a tra,iti(n alu&

a'&, )('tin4 '+'t&m'0 ;ir&)t )('t' ar& a'&, (n th& *ri)&0 O&rh&a, )('t' ar& -i4ur&'

*r(*(rti(nat&l+ t( th& ,ir&)t la(r )('t' at th& rat& (- 3##80

0 INTRODUCTION

$il%&r'(n !(m*an+ i' in th& u'in&'' (- manu-a)turin4 al&' *um*' an, -l(.

)(ntr(ll&r'0 $il%&r'(n i' )urr&ntl+ -a)&' .ith ,&)linin4 *r(-it mar4in' r&lati& t( in,u'tr+

)(m*&tit(r'0 Th& '&&r& in,u'tr+ ha' *ri)& )uttin4 in *um*' u'in&'' .hi)h i' $il%&r'(n'

mani4ht' t&am ha, )(ll&)t&, th& ,ata a'&, (n th& (*&ratin4 r&'ult' (- ?ar)h 2###

'h(. that th& )(m*an+ ha' 4r(u*&, it' (&rh&a, int( 5 )('t it&m' .hi)h i'

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?a)hin&r&lat&, &7*&n'&'

R&)&iin4 an, *r(,u)ti(n )(ntr(l

S&tu* la(r )('t

"n4in&&rin4

Pa)%a4in4 an, 'hi*m&nt

*0 ANALYSIS OF PROBLEM

* S!%!e$e+! ,- .&,/e$1

The issue from this case is the current pricing method used by

Wilkerson is that the real manufacturing cost of each product is not

realistic. The current method assumes the overhead costs are correlated

to the labor costs at 300% rate, while many of the overhead activities are

performed per product line regardless of the amount of unit produced.

Wilkersons e!isting cost system is the traditional volume"based costing

which is direct materials and labor costs are based on standard prices of

materials and labor rates. #n addition, the manufacturing overhead is also

considered as cost and it is allocated in proportion to direct labor cost at

the rate of 300%.

** C%1e ,- .&,/e$

There are a few factors show that volume"based costing may produce

inade$uate estimate of the unit cost which is the rst, overheads are $uite high

&300% to direct labor cost'. (econd, products vary in terms of consumptions of

indirect resources. Pumps and valves are standard products, whereas )ow

controllers are customi*ed, so we should e!pect higher unit cost for the latter.

+!isting volume"based costing with one"stage indirect cost allocation does not

allow dierentiating indirect cost among products in accordance with their

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demand on indirect resources. -urrently overheads are allocated to products in

proportion to direct labor costs, although they dont relate to direct labor

technologically.

*0 ALTERNATI2E SOLUTIONS

Activity-based Costing

Fr(m th& )a'& 'tu,+ .& %n(. that $il%&r'(n u'&' (lum& a'&, )('tin4 '+'t&m a'

th&+ r&)(r, th& ,ir&)t mat&rial an, la(r )('t' a'&, (n 'tan,ar, *ri)&'0 Oth&r than that th&

(&rh&a,' ar& )har4&, a' 3##8 (- th& ,ir&)t la(r )('t0 Thi' im*li&' (&rh&a,' ar& a**li&,

,ir&)tl+ in r&lati(n t( la(r )('t' irr&'*&)ti& (- r&l&an)&0 A' 'h(.n in th& Tal& 1 &l(. .&

)an '&& that al&' ar& *&r-(rmin4 .ithin th& *lann&, mar4in .hil& *um*' ar& *&r-(rmin4

&l(. th& *lann&, 4r('' mar4in a)tual 4r('' mar4in 1C05#8D an, -l(. )(ntr(ll&r' ar&

*&r-(rmin4 a(& th& *lann&, 4r('' mar4in0 A)tual 4r('' mar4in E18D0 Thi' m&th(,

(lum& a'&, '+'t&m i' n(t r&lial& 'in)& &a)h *r(,u)t ari&' 'i4ni-i)antl+ in it' (&rh&a,'

)('t' a''()iati(n an, th& a'i) a''um*ti(n0

Thu' -r(m th& 'ituati(n that $il%&r'(n !(m*an+ ha' -a)&, .& 'u44&'t that th&

)(m*an+ 'h(ul, u'& th& a**r(*riat& )('t ,ri&r' that r&-l&)t th& r&lati(n'hi* &t.&&n th&

(lum& (- *r(,u)ti(n (- in,ii,ual *r(,u)t' an, th& l&&l (- (&rh&a,'0 Tal& 2 &l(. 'h(.'

&a)h (- th& )('t ,ri&r mat)h .ith th& a**r(*riat& )('t *((l0 F(r &7am*l& ma)hin& h(ur' i'

th& a**r(*riat& )('t ,ri&r -(& th& ma)hin&r&lat&, &7*&n'&' )('t *((l0

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Valves Pumps Flow Controllers

Direct labor cost $10.00 $12.50 $10.00

Direct material cost 16.00 20.00 22.00

Manufacturing overhead(@300!

30.00 37.50 30.00

"tandard unit costs $56.00 $70.00 $62.00

#arget selling price $86.15 $107.69 $95.38

Planned gross margin (! 35% 35% 35%

$ctual selling price $86.00 $87.00 $105.00

$ctual gross margin (! 34.90% 19.50% 41.00%


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T%/e : P&,c! P&,-"!%/""!' A+%'1"1 (2,$e B%1e C,1!"+4)

C,1! D&"#e& C,1! P,, R%!e

M%c5"+e Re%!e Ex.e+1e1 ?a)hin& H(ur' 336###112## G 3#

Se!. L%/,& C,1!1 Pr(,u)ti(n Run E####16# G 25#

Rece"#"+4 %+ P&,c!",+ c,+!&, Pr(,u)ti(n Run 1####16# G 1125

E+4"+ee&"+4 C,1!1 "n4in&&rin4 H(ur' 1#####125# G #

P%c%4"+4 %+ S5".."+4 C,1!1 Num&r (- Shi*m&nt' 15####3## G 5##

P&,c! C,1!"+4 2%#e1 P$.1 F,7 C,+!&,e&1 T,!%

M%c5"+e 8&1 35# 625# 12##

M%c5"+e Re%!e Ex.e+1e1 (x30) 1125## 15## 36### 336##

Pr(,u)ti(n Run' 1# 5# 1##

Se!. L%/,& Ex.e+1e1 (x*90) 25## 125## 25### E###

Rece"#"+4 %+ .&,c!",+ c,1!1(x*9) 1125# 5625# 1125## 1###

"n4in&&rin4 Hr' 25# 35 625

E+4"+ee&"+4 Ex.e+1e1 (x;0) 2#### 3#### 5#### 1####

N( (- 'hi*m&nt' 1# # 22#

P%c%4"+4 < S5".."+4 C,1!1 (x900) 5### 35### 11#### 15###

T,!% O#e&5e% Ex.e+1e1 ;0600

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T%/e *: C,1! &"#e& %+ c,1! .,,

T%/e 3: P&,c! D%!% = Ac!"#"!' B%1e C,1!"+4


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Pe& +"! Ac!"#"!' B%1e C,1!"+4 2%#e1 P$.1 F,7 C,+!&,e&1

P&,c!",+ U+"!1 5##0# 125##0# E###0#

D"&ec! L%/,& C,1! 1#0# 1205 1#0#

D"&ec! M%!e&"% C,1!160# 2#0# 220#

M%c5"+e Re%!e Ex.e+1e1 1125#5## G 150# 15##125## G150#

36###E### G C0#

Se!. L%/,& Ex.e+1e1 25##5## G #033 125##125## G 10## 25###E### G 6025

Rece"#"+4 %+ .&,c!",+ 1125#5## G 105 5625#125## G E05 1125##E### G 201

E+4"+ee&"+4 Ex.e+1e1 2####5## G 206 3####125## G 20E# 5####E### G 1205#

S5".."+4 Ex.e+1e1 5###5## G #06 35###125## G 20# 11####E### G 205#

T,!%>6? 9;*0 939

T%/e >: Pe& U+"! Ac!"#"!' B%1e C,1!"+4

M%&4"+ C%c%!",+ Valves Pumps FlowControllers

P%++e Se"+4 P&"ce /.1 02./ 1.3

P&r unit :(lum& Ba'&, !('tin4 1/ 20 /4

?ar4in a'&, (n Plann&, SPD 31.00% 31.00% 31.00%

Pe& +"! Ac!"#"!' B%1e C,1!"+4 46.17 58.20 115.38

M%&4"+ (/%1e ,+ P%++e SP) 46.41% 45.96% 20.96%

Ac!% Se"+4 P&"ce / 2 01

P&r unit :(lum& Ba'&, !('tin4 1/ 20 /4

?ar4in a'&, (n A)tual SPD 35.% .1% 5%

Pe& +"! Ac!"#"!' B%1e C,1!"+4 46.17 58.20 115.38

M%&4"+ (/%1e ,+ Ac!% SP) 46.32% 33.10% 9.88%

T%/e 9: M%&4"+ C%c%!",+

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Tal& 2 *r&'&nt' .ith th& in-(rmati(n a(ut ari(u' a)tiiti&' (n .hi)h .& ha& a'&, th&

)('tin4 a'i)all+ th& )('t *((l' ,ri&r' (- th& r&l&ant )('t *((l' an, th& rat& (- th& )('tin4

.hi)h 'h(ul, & ta%&n int( a))(unt0 In (r,&r t( )arr+ (ut an a)tiit+ a'&, )('tin4 '( that .&

)an -in, th& r&l&ant )('t' a''()iat&, .ith &a)h *r(,u)t .& ,( th& *r(,u)t .i'& a)tiit+ a'&,

)('tin4 -(r th& in,ii,ual )('t *((l' 'h(.n in Tal& 30 "7hiit E *r(i,&' u' .ith th& ,ata

r&latin4 t( th& m(nthl+ *r(,u)ti(n an, (*&ratin4 'tati'ti)' .hi)h )an & )(min&, .ith th&

)('t' -(r &a)h )('t *((l ,&ri&, in tal& 2 t( 4i& u' th& in,ii,ual *r(,u)t .i'& a)tiit+

a'&, )('tin40 Th& ,ata (tain&, -r(m tal& 3 &nal&' u' t( arri& at tal& E .hi)h )al)ulat&'

th& *&r unit AB! ta%in4 int( a))(unt th& t(tal )('t -(r &a)h a)tiit+ an, th& num&r (- unit'

*r(,u)&, (- &a)h *r(,u)t t( 4&t th& in,ii,ual *r(,u)t .i'& *&r unit )('t'0 Th& t(tal )('t' .ill

& th& 'um (- th& ,ir&)t )('t' an, th& AB!0 Thi' t(tal )('t (- &a)h *r(,u)t .ill &nal& u' t(

)al)ulat& th& mar4in' that &a)h *r(,u)t *r(i,&' a'&, (n th& *lann&, a' .&ll a' th& a)tual

'&llin4 *ri)&'0 Th& in-(rmati(n i' *r(i,&, in tal& 5 a' 'h(.n &l(.0

Direct costing and Contribution analysis

;ir&)t )('tin4 an, )(ntriuti(n anal+'i' ar& a,&/uat& -(r 'h(rtt&rm ,&)i'i(n ma%in4

&040 a))&*t (r r&


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30 RECOMMENDATIONS

Ba'&, (n th& anal+'i' 4i&n a(& .& r&)(mm&n,&, that $il%&r'(n !(m*an+ m(&

-r(m :(lum&a'&, !('tin4 t( A)tiit+a'&, !('tin4 t( &tt&r anal+9& th& )('t -i4ur& an,

h&alth (- th& )(m*an+0 It .ill & &nal& th& (&rh&a,' t( & atta)h&, t( th& *r(,u)t' an,

a)tiiti&' .h&r& th&+ ar& &in4 )(n'um&, an, n(t ,ir&)tl+ & r&lat&, t( th& *r(,u)t' (n th&

a'i' (- *r(,u)ti(n run ,ir&)t la(r h(ur'0 Al'( )an & '&&n -r(m th& anal+'i' (- th& 2

m&th(,' th& 4r('' mar4in r&turn' ar+ in (th )a'&'0 Th& )l&ar in,i)at(r (- that i' th& -l(.

)(ntr(ll&r that th& )(m*an+ manu-a)tur&'0 :(lum& a'&, )('tin4 in,i)at&' that th& *r(,u)t i'

hi4hl+ *r(-ital& *r(i,in4 a 4r('' mar4in (- E#0C58 .h&r&a' th& a)tiit+ a'&, )('tin4

'h(.' u' that -l(. )(ntr(ll&r' ar& n(t *r(i,in4 an+ r&turn' an, (n th& )(ntrar+ it i' a l(''

ma%in4 *r(,u)t 'in)& .& ar& unal& t( r&)(&r &&n th& )('t' in(l&,0 $& r&)(mm&n, th&

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)(m*an+ t( r&i&. it' *(li)+ in r&'*&)t t( -l(. )(ntr(ll&r'0 $il%&r'(n )an .(r% (n )han4in4

th& *ri)&' (- in,ii,ual -l(. )(ntr(ll&r' in (r,&r t( '&)ur& a h&alth+ *r(-it mar4in0 On& .a+

t( ,( thi' i' '&ttin4 *ri)&' in a))(r,an)& .ith th& am(unt (- r&'(ur)&' )(n'um&, a)tiit+

a'&, *ri)in4D + in,ii,ual *r(,u)t (r )u't(m&r0

90 E@TERNAL SOURCING

https677www.business"case"analysis.com7activity"based"costing.html

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