Compilation of Wilkerson
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Wilkerson Case Study
Lessons learned from this topic and case study:
1. Managers need to be able to estimate the cost of different responsibility centres and products to go to with monitoring the performance of different departments and also to answer with stopping point making about product pricing, profitability of individual products, assist with decisions when making changes to product lines and various other managerial requirements such as controlling cost and valuing inventory for financial statements.
2. Dividing the commercial enterprise into cost aspirations such as departments or products can assist with creating great accuracy when allocating costs to severally cost object.
3. The more we break down the business into activities and cost objects, the greater the accuracy of allocating costs to each object.
4. Costs can be allocated as direct or indirect costs link to each cost object. Indirect costs must be
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estimated for each cost object and it is important to assess how much of the costs allocated to each object are indirect as the greater the proportion of indirect costs allocated, the greater the margin for mistake in these estimations.
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Managers need to be careful of all overpricing or under-pricing goods delinquent to parcelling of costs to each product. As was shown with the Wilkerson case on further analysis of costs using the activity ground costing method the company had been under-pricing some goods while over pricing others. This was affecting their profits and their ability to make heavy business decisions on the pricing of products to meet market demands.
6. natural action based costing is more complex to use just used correctly should improve the accuracy of allocating indirect costs to cost objects. This in turn produces more accurate allocation of costs and assists to make more informed management decisions.