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Wilkerson Company Project

In: Business and Management

Submitted By jojov22
Words 263
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1. What is the competitive situation faced by Wilkerson?
Wilkerson’s competitors have cut prices on their pumps, in order to maintain market share, Wilkerson also cut the price of their pumps. This dropped Wilkerson’s GM by about 15%. At the same time, Wilkerson was able to increase the price of their flow controllers by 10% without a drop in demand.
The manufacturing manager now feels that the competitors’ valves are of equal quality as that of Wilkerson. Currently, the competitors have not changed their prices and GM has been maintained at 35%.
Wilkerson should be aware that its competitors could start dropping the prices of their valves at which time, Wilkerson would need to drop their prices or lose market share. In essence, they would be in the same situation as they are in now with the pumps.

2. Given some of the apparent problems with Wilkerson’s 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?
The current method does not provide and accurate representation of the actual cost to produce the 3 products. The overhead rate is 300% and directly related to the labor costs. Many of the overhead hosts are actually batch level activities and not related to the number of units produced.

While adopting the approach in which manufacturing overhead is treated as a period expense would be more accurate and assign more of the overhead cost to the flow controllers, this is not the most accurate either....

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