Wilkerson Company

Question:

1. Develop and diagram an activity-based costing system and calculate the profitiability of Wilkerson's three product line. Are these profitabilities different from the probabilities Wilkerson reports based on its current costing system?

2. Base on your analysis, what actions should the company take to improve profitability?

Sales Direct Labor Expense Direct Materials Expense Manufacturing overhead $2,152,500 271,250 458,000 100% Setup labor Receiving and production control Engineering Packaging and shipping $336,000 40,000 180,000 100,000 150,000 Total Manufacturing Overhead Gross Margin General, Selling&Admin. Expense Operating Income (pre-tax) 806,000 $617,250 559,650 $57,600 29% 3%