Read carefully the case study entitled Wilkerson Company and answer the following questions.
- 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 assign- ment have on reported product costs and profitability? What causes any shifts in cost and profitability?
- Based on your analysis for question 2, what actions might Wilkerson’s management team consider to improve the company’s profitability?