i. Introduction
Wilkerson Company is facing an issue where the company is facing lower pre-tax operating margin. Their pre-tax operating margin being that of 3%, and when that is compared to other pre-tax operating margins, it was found that other companies are about 10% pre-tax operating margin (Kaplan, 2001) . Therefore, Wilkinson is 7% lower. Fortunately for Wilkerson, they have increased their prices by 10% and it has not affected the buyers, so they have not lost any business in doing so (Kaplan, 2001). Robert Parker, who is the President of the company, has had no option but to reduce the prices to maintain volume because his competitors have done the same. Wilkerson’s accounting system currently uses Overhead Absorption Rate (Kaplan, 2001). They …show more content…
Each component of manufactured goods was indicted for through material and labor cost. Material cost is built on the prices paid for mechanisms under yearly acquiring contracts (Kaplan, 2001).
ii. Problem and Analysis
A.
Wilkerson is faced with many competitive situations both internal and external. Wilkerson’s competitors have been reducing prices on pumps. Which causes a decrease in profits because the price cutting in pumps. The pre-tax margin is currently less than 3%, when the historical average is 10% (Kaplan, 2001). This results in reductions of gross margin of 19.5%. In addition, manufactured goods compete on price and volume (Kaplan, 2001). Pumps are the most expensive to produce but obtain the lowest
Wilkerson Company is facing an issue where the company is facing lower pre-tax operating margin. Their pre-tax operating margin being that of 3%, and when that is compared to other pre-tax operating margins, it was found that other companies are about 10% pre-tax operating margin (Kaplan, 2001) . Therefore, Wilkinson is 7% lower. Fortunately for Wilkerson, they have increased their prices by 10% and it has not affected the buyers, so they have not lost any business in doing so (Kaplan, 2001). Robert Parker, who is the President of the company, has had no option but to reduce the prices to maintain volume because his competitors have done the same. Wilkerson’s accounting system currently uses Overhead Absorption Rate (Kaplan, 2001). They …show more content…
Each component of manufactured goods was indicted for through material and labor cost. Material cost is built on the prices paid for mechanisms under yearly acquiring contracts (Kaplan, 2001).
ii. Problem and Analysis
A.
Wilkerson is faced with many competitive situations both internal and external. Wilkerson’s competitors have been reducing prices on pumps. Which causes a decrease in profits because the price cutting in pumps. The pre-tax margin is currently less than 3%, when the historical average is 10% (Kaplan, 2001). This results in reductions of gross margin of 19.5%. In addition, manufactured goods compete on price and volume (Kaplan, 2001). Pumps are the most expensive to produce but obtain the lowest