by Wilkerson? There is a different competitive level in every Wilkerson product line. Pumps, the major commodity product line is facing a very stiff price competition, which is behind the decline in the company profits and actual gross margin to less than 20%, compared to 35% planned gross margin. Consequently, the Wilkerson company needs to reduce the price every month to maintain the market leader position. Wilkerson produces high quality products such as Valves, as well. Here Wilkerson gained
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Case “Wilkerson Company” • The case is available for purchase at the NYUBookstore as a digital coursepack (in store or online at http://www.bookstores.nyu.edu). • Form your own group of at most 4 students (including yourself). Each group submits one solution. Show your calculations for problems 2-5. 1. What is the competitive situation faced by Wilkerson? 2. What is the structure of the existing (traditional) costing system? Evaluate the features of this system. Should Wilkerson abandon its
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WILKERSON COMPANY Executive Summary: The Wilkerson Company is not currently accounting correctly for their costs. They should be using an Activities Based Costing method and they will see that Flow Controllers are actually costing them significantly more than their other products and more than is reflected in their current accounting system. Actual gross margins will change noticeably with an Activities Based Costing system. Even operating at full capacity, Flow Controllers at the current price
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environment. At a minimum, include any barriers to entry, industry maturity, the specific market and production complexity for each product, and marketing concerns. Wilkerson is a manufacturing company specializing in manufacturing components for water purification systems; the company makes valves, pumps, and flow controllers. Wilkerson is a supplier to companies that actually manufacture the water purification equipment. The relevant officers of the organization are: * Robert Parker, President
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Case “Wilkerson Company” • The case is available for purchase at the NYUBookstore as a digital coursepack (in store or online at http://www.bookstores.nyu.edu). • Form your own group of at most 4 students (including yourself). Each group submits one solution. Show your calculations for problems 2-5. 1. What is the competitive situation faced by Wilkerson? 2. What is the structure of the existing (traditional) costing system? Evaluate the features of this system. Should Wilkerson abandon its
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Wilkerson Company manufactures water purification equipment with unique high quality valve design. Recently, the company has experienced deterioration in pre-tax margins to below 3%, far below the historical 10% margins and sales has fallen bellow 20% due to competitive situation that is driving prices down on Pumps (commodity products). These products are produced in high volumes for a market with high price competition. Wilkerson is a quality leader, but should be prepared to compete on price.
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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 & Shipping
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Wilkerson has always been a competitive force in the pump manufacturing industry, but lately their profits have dropped to an unacceptable level. The drop in profits has forced management to take a look at several possible solutions, including their accounting methods. Historically, Wilkerson has relied on the traditional costing method of accounting meaning that they have allocated overhead as a percentage of the labor hour costs to each of the three products. The overhead costs are currently set
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Wilkerson Co. Case Group 6 #1) Wilkerson is dealing with many different factors when it comes to the competition in their industry. First, the main issue in regards to competition is the fact that all the competitors are cutting the price on their pumps in order to gain market share and creating a price war within the industry. This is something that happens often in very competitive industries and usually the largest companies survive such tactics. This tactic is good for the consumers in the
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Wilkerson Company Analysis June 30th, 2014 1. If Wilkerson were to cut prices, based on contribution margin, to just cover short-term variable costs, what consequences could it experience? Contribution margin-based pricing attempts to maximize profit generated from the sale of each unit of product by maximizing the difference between that product’s price and variable costs, or contribution margin. Under this pricing strategy, only variable costs, which increase with a higher sales volume and
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