Wilkerson Company (HBS 9-101-092) Costing Products and Processes (UVA-C-2309R), p. 19-27 (distributed previously) Note: 1. At the bottom of page 2 of the case, Peggy Knight lists four observations from her task force's study of Wilkerson's overhead costs. Items 1 and 4 are correct. Items 2 and 3, however, should read as follows:

2. A set-up had to be performed for each production run.

3. People in the receiving and production control departments ordered, processed, inspected, and moved each batch of the same type of component separately for each production run. This work required about the same amount of time whether the components were for a long or a short production run, or whether the components were expensive or inexpensive. Assignment: Under the simple, traditional cost system, pumps cost $70.00. Under the proposed activity based costing system, they appear to cost approximately $56.50. Please verify these figures. If you have the time (it is optional), calculate the costs for valves and flow controllers under the activity based costing system. What causes the different product costing methods to produce such different results? Which set of costs are "better"? Why