Cost Allocation
Wilkerson Company is a fluid control devices manufacturer and they supply products to manufactures of water purification equipment. The company has established a strong brand name in the industry because of the high quality of its valves. Over the year, the company has extended their product range to pumps and flow controllers.
The main learning outcome from analyzing the case study is manufacturing overhead cost allocation. Exhibit 2 in the case study shows pumps has a highest manufacturing overhead cost compare to valves and flow controller. The common overhead cost drivers in the production are machine hours, production runs and hours of engineering work.
The key issue in this case study is the gross margin on pump sales is 19.5% that well below the company's target gross margin of 35%. If we analyze deeply the data in Exhibit 4, it clearly shows that the manufacturing process for flow controller has more activities compared to valve and pump. For example, to produce 4,000......
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Approximate Pages: 2 (250 words per double-spaced page)
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