Aaron Wilson, Brittni Henson, Dennie Smyth & Joshua Boatright Midwest Office Products Case ACCT. 6233 October 15, 2012 1. Based on the interviews and data in the case, estimate: a. The cost of processing cartons through the facility The two costs of processing cartons through the facility are warehouse costs and warehouse personnel costs. The total processing costs are $54/carton. Cartons/yr | 80000 | Commercial Freight | 75000 | Desktop Delivery | 5000
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Case Igor Baranov Executive Summary Taking into account the difference among product and high proportion of overheads, Wilkerson should abandon its existing cost system and move to activity-‐based costing. The profitability analysis indicates that the company earns healthy margins on pumps and valves. However, the margin of flow controllers at actual usage of capacity is negative. Wilkerson should consider
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1. Using the information in the case, design an activity-based costing system and estimate product costs and gross margin percentages for valves, pumps and flow controllers. Justify your reasons for your ABC system design and computations. As per the ABC costing system, the 5 overhead cost drivers that can be identified are: A. Product Sustaining Activity Costs (i) Engineering Costs B. Batch Activity Costs (i) Receiving & Production Costs (ii) Setup Labor Costs (iii) Packaging
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Baxter Battery – An ABC Example Baxter Battery Company Income Statement Year Ended December 31, 2009 Sales Cost of goods sold Direct materials Direct labor Manufacturing overhead Gross margin Selling and administrative expenses Shipping expenses Marketing expenses General administrative expenses Net operating income loss $ 50,000,000 $ 15,000,000 12,000,000 14,000,000 41,000,000 9,000,000 3,000,000 2,000,000 6,000,000 11,000,000 $ (2,000,000) Manufacturing overhead is allocated to products
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The competitive situation faced by your company varies with each of its product lines. It is important that the firm be able to draw distinctions between each of its products’ markets in order to make decisions that will keep the company profitable yet competitive. Pumps are a commodity which means that there is demand for the product but it is not unique; there are no major qualitative distinctions to push consumers to prefer pumps your company over those any other pump manufacturer. The existence
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overhead assignment by adopting a contribution margin approach (i.e. variable costing) in which overhead is treated as a period expense? Why? Why not? Yes they should adopt the variable costing when it comes to overhead so that they can actually see where the costs are being spent per period. They really don’t have the option of increasing the price so they are going to have to cut back on certain activities. Variable costing will help determine in what area they can do that in. 3. Describe Wilkerson’s
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examples of horizontal management improvement initiatives. However management systems have lagged significantly in tracking and providing information about the horizontal aspects of business and Activity based costing /Activity based management mirrors this horizontal view. The focus of ABC is to provide accurate information about true costs of products, services, processes, activities etc. Activity based management makes this cost and operating information useful by providing value analysis ,cost
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New product Recomendation ABC Company is trying to increase sales from 1.2 million to 3 million within a 3 year time frame which is a very aggressive move to make since that goal of 3 million in sales is more than twice what the company is currently brining in. The company will need to review several factors to determine if this type of an increase is even possible to make by adding an additional product of making cedar doll houses to try to supplement the income. There are several factors that
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provided by both financial and management accountants..I am going to mention some theory with regards to legal issues, focus time dimension (points 1,2 and 3) in relation to the product Lilywhite. Than going to mention the marginal and absorption costing with figures from the table provided in the case study and the reason for underabsorption with a bit of calculations. Next, for decison whether to continue the production of lilywhite (point 5) Have no idea wht abt other financial factors..enlighten
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......................................................................... 10 Key Considerations ..................................................................................................................................... 10 VI. Variable Costing
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