Management And Accounting Process Assignment

Running Head: MANAGEMENT ACCOUNTING
MANAGEMENT ACCOUNTING
Name of the student
Name of the University
Author’s Note

MANAGEMENT ACCOUNTING
1
Table of Contents
Answer to Part 1:........................................................................................................................2
Answer to part 2:........................................................................................................................3
Answer to part 3:........................................................................................................................4
Answer to part 4.........................................................................................................................5
Answer to part 5:........................................................................................................................6
References:.................................................................................................................................8

MANAGEMENT ACCOUNTING
2
Answer to Part 1:
Activity based costing is a method of evaluating all the possible courses of actions or
activities that are engaged with in the process of manufacturing a product and assigning costs
to each activity specifically. It also includes assigning overhead and indirect costs to each
activity (Drury, 2013). Wilkerson Company has been experiencing decline in their profits due
to decreasing price of their product. Hence, the company considers revising its product line
and flow controller line.
Activity based cost model of Wilkerson company will include costs of all such
activities that are the part of production process of the company. The company is specialised
in three product lines for which it purchases semi-finished materials from its suppliers and
convert these products into finished components with the help of machinery and labour
efforts. The machine equipment and labours used were same for all the three product line of
the company.
Three products of the company were as follows:
Valves – These were prepared by assembling four different semi-finished components and
the gross margin was kept at 35 per cent.
Pumps- Five semi-finished products were assembled with the help of machines and the
products were margined at 35 per cent.
Flow controllers- These were used to control the rate and flow of the chemicals and required
more components and labour than compare to the other two products. The company decided
to increase its price by 10% with no change in the demand.
Costs allocated to each activity used to produce all the three product line of the company
were as follows: