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What is the competitive situation currently being faced by Wilkerson Company's executives?
2. 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?
3. How does Wilkerson's existing cost system operate? Develop a diagram to show how costs flow from factory expense accounts to products in the existing cost system? Are there any flaws in their existing cost system?
4. Develop a diagram for activity-based cost model using the information in the case. 5. Classify each activity using the ABC cost hierarchy categories. 6 Calculate the activity rates for each of the activity pools. Use both acual and capacity-based cost driver for your calculation. Which cost driver rates should be used, actual or rapacity-based,
7. Provide your best estimates about the cost and profitability of Wilkerson's three product lines using ABC system? Report your results using both actual and capacity-based cost drivers.
8. Compare the product cost and profitability under the existing system and ABC system. What difference does your ABC cost assignment have on reported product cost and profitability? What causes any shifts in cost and profitability?
9. Based on the analysis done using the ABC system, what actions might Wilkerson's management team consider for improving the company's profitability?
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