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Wilkerson Company-Case Study Analysis

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Sunischit Mishra

on 5 October 2016

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Transcript of Wilkerson Company-Case Study Analysis

Fall in profits-A growing concern
SYNOPSIS
What is the competitive situation faced by Wilkerson?
Vying Position Classified for Distinct Products
Pumps-Commodity Product; Margin at 3%;Sales Fallen Below 20%
Valves-Unique design led to a major presence
Flow Controllers-No attempt by competitors for market shares; Margins maintained at an optimum of 41 %

Wilkerson has been compensating salespersons with commissions on their gross sales volumes (less returns). Parker wonders whether the company should change this incentive system.

Wilkerson Company-Case Study Analysis
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?
Period Expense approach entails riddance of overhead costs making the above approach unsound
Margins at an all-time low of 3%
3 Products -Pumps,Valves,Flow Controllers
Steep fraction of overhead costs in production process makes approach unrealistic
How does Wilkerson’s existing cost system operate? Develop a diagram to show how costs flow from factory expense accounts to products.
Develop and diagram an activity-based cost model using the information in the case. Provide your best estimates about the cost and profitability of Wilkerson’s three product lines. What difference does your cost assignment have on reported product costs and profitability? What causes any shifts in cost and profitability?
ANALOGY
What actions might Wilkerson’s management team consider to improve the company’s profitability?
Wilkerson's management team should make an attempt to leverage amicable combative bearings in Flow Controllers
Accordingly hike their price keeping in view its existing demand
Redesign Flow Controllers to reduce the number of unique components as each component in it currently requires a separate production
E.g., Hewlett-Packard and Tektronix
What concerns, if any, do you have with the cost estimates ? What other information or analysis would you want for better cost and profitability estimates?
During seasons of soaring demand machines worked 12,000 hours,factory handled 180 production runs and 400 shipments;but conclusions are based on March
Optimum calculations should be derived on past years demands charts
Salespersons will be inclined to undersell the products, so as to escalate their sales volume
System should undergo change to reward based on profit out of a singular sale to make the interests of salespersons and company converge
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