1、Wilkerson Case Study1.How does Wilkersons existing costing system operate?2.Develop an ABC model and estimate product profitability of the 3 product lines:a)What are the cost drivers?b)What are the cost driver rates?c)What are the differences in product profitability vs the current system?d)What cau
2、ses these differences?3.What actions might be appropriate for improving profitability?1.How does Wilkersons existing costing system operate?MachineExpense$336kSet-UpLabour$40kReceiving/Prod.Control$180kPackaging/Shipping$150kEngineering$100kProduction Cost Centre$806kValves,Pumps,Flow Controllers300
3、%x Direct Labour CostDirect material$Direct labour$1.Product Profitability Analysis(current system)Valves$Pumps$Flow Controllers$Direct labour10.0012.5010.00Direct materials16.0020.0022.00Overheads(=300%x Direct labour)30.0037.5030.00Total cost56.0070.0062.00Price86.0087.00105.00Margin(%)30.00(34.9%
4、)17.00(19.5%)43.00(41.0%)2 a)ABC Cost DriversActivityCost$Cost DriverMachine components336,000Machine hoursSet up machines40,000No.of production runsReceive and schedule components180,000No.of production runsProvide engineering support100,000Engineering hoursPack and ship components150,000No.of ship
5、ments2 b)ABC Cost Driver RatesActivityCost$Cost DriverActivity Cost Driver RateMachine components336,000Machine hours11,200$30/m/c hrSet up machines40,000No.of production runs160$250/runReceive and schedule components180,000No.of production runs160$1,125/runProvide engineering support100,000Engineer
6、ing hours1,250$80/eng.hrPack and ship components150,000No.of shipments300$500/shipment2 c)ABC Overhead Analysis:Summary ValvesPumpsFlow ControllersABC Overhead/unit:Machine-related15.0015.009.00Set-up0.331.006.25Receiving and production control1.504.5028.13Engineering2.672.4012.50Packaging and shipp
7、ing0.672.8027.50Total20.1725.7083.38Under current system30.0037.5030.002 c)ABC Overhead Analysis:Detailed Workings:Valves1Cost Driver Rate2Activity for Valves3=1 x 2Allocation to Valves in Total$4=Column 3/7500Per unit Cost$ABC OverheadMachine-related$30/m/c hr3,750112,50015.00Set-up$250/run102,5000
8、.33Receiving and production control$1,125/run1011,2501.50Engineering$80/eng.hr25020,0002.67Packaging and shipping$500/shipment105,0000.67Total20.172 c)ABC Overhead Analysis:Detailed Workings:Pumps1Cost Driver Rate2Activity for Pumps3=1 x 2Allocation to Pumps in Total$4=Column 3/12,500Per unit Cost$A
9、BC OverheadMachine-related$30/m/c hr6,250187,50015.00Set-up$250/run5012,5001.00Receiving and production control$1,125/run5056,2504.50Engineering$80/eng.hr37530,0002.40Packaging and shipping$500/shipment7035,0002.80Total25.702 c)ABC Overhead Analysis:Detailed Workings:Flow Controllers1Cost Driver Rat
10、e2Activity for Flow Contrs3=1 x 2Allocation to Flow Contrs in Total$4=Column 3/4,000Per unit Cost$ABC OverheadMachine-related$30/m/c hr1,20036,0009.00Set-up$250/run10025,0006.25Receiving and production control$1,125/run100112,50028.13Engineering$80/eng.hr62550,00012.50Packaging and shipping$500/ship
11、ment220110,00027.50Total83.382 c)Product Profitability Analysis:ABC Valves$Pumps$Flow Controllers$ABC Analysis:Direct labour10.0012.5010.00Direct materials16.0020.0022.00Overheads20.1725.7083.38Total cost46.1758.20115.38Price86.0087.00105.00Margin%39.8346.3%28.833.1%(10.38)-9.9%Existing System:Margi
12、n%30.0034.9%17.0019.5%43.0041.0%2 c)What does the ABC analysis reveal?Valves are highly profitablePumps achieve target margin(Wilkerson was right to match competitors price reduction)Flow Controllers are barely profitable(no wonder competitors did not undercut Wilkersons recent price increase)Valves
13、PumpsFlow ControllersMachine hours per unit0.50.50.3Units per production run75025040Units per shipment75017918Engineering cost per unit$2.67$2.40$12.50Flow Controllers are produced and shipped in smaller batches,and require much more engineering support2 d)What has caused the differences in profitability?结束语当你尽了自己的最大努力时，失败也是伟大的，所以不要放弃，坚持就是正确的。When You Do Your Best,Failure Is Great,So DonT Give Up,Stick To The End谢谢大家荣幸这一路，与你同行ItS An Honor To Walk With You All The Way演讲人：XXXXXX 时 间：XX年XX月XX日
