Wilkerson Case Study
Essay by Christina souriac • July 6, 2019 • Essay • 699 Words (3 Pages) • 955 Views
Wilkerson Case
Production runs is the cost driver for setup labor as set-ups, “had to be performed each time a batch of components had to be machined in a production run.” [1]Receiving and production control’s cost driver is number of production units as the company only had one production department, and this is where all products were assembled and finished. Engineering is straightforward. Its cost driver is hours of engineering work. Finally, Packaging and shipping’s cost driver is number of shipments and not units because the same amount of work was required not matter the number of items in a shipment. After using this data, I applied the direct labor per unit, and materials cost per units to allocate the Direct Labor and Materials Expenses.
Exhibit 1
Activities Driving Cost Overhead Cost | ||
Activity | Cost Driver | Traceable Cost |
Machine-related expenses | Machine Hours | $ 336,000.00 |
Setup Labor | Production runs | $ 40,000.00 |
Receiving and production control | Production Units | $ 180,000.00 |
Engineering | Hours of engineering work | $ 100,000.00 |
Packing and shipping | Number of shipments | $ 150,000.00 |
Exhibit 2
| Overhead Rates by Activity |
| |
Activity | Costs | Transactions | Rate per Transaction |
Machine-related expenses | $336,000 | 11,200 | 30 |
Setup Labor | $40,000 | 160 | 250 |
Receiving and production control | $180,000 | 24,000 | 7.5 |
Engineering | $100,000 | 1,250 | 80 |
Packing and shipping | $150,000 | 300 | 500 |
Exhibit
Product Costs | |||
Activity | Valves | Pumps | Flow Controllers |
Machine-related expenses | $ 112,500 | $ 187,500 | $ 36,000 |
Setup Labor | $ 2,500 | $ 12,500 | $ 25,000 |
Receiving and production control | $ 56,250 | $ 93,750 | $ 30,000 |
Engineering | $ 20,000 | $ 30,000 | $ 50,000 |
Packing and shipping | $ 5,000 | $ 35,000 | $ 110,000 |
Total Overhead Costs | $ 196,250 | $ 358,750 | $ 251,000 |
| |||
Direct Materials Expense | $ 120,000 | $ 250,000 | $ 88,000 |
Direct Labor Cost | $ 75,000 | $ 156,250 | $ 40,000 |
Total | $ 391,250 | $ 765,000 | $ 379,000 |
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