Wilkerson uses currently a method which assumes that there is a correlation between the overhead cost and the labor cost by rate of 300%. Accordingly, this method is not an effective one because of the high overhead cost proportion which is 52.5% (806,000/1,535,250)
Dealing with the overhead expenses as a period expenses leads to dealing with the product cost and profitability without taking in consideration the overhead costs for both labor and material. Accordingly, this method suggests the correlation between the variable costs of both material and labor and the product price. Accordingly, one can see the high allocated overhead cost for the flow controller because of its higher material price and not because of its higher activity costs,
Dealing with the overhead expenses as a period expenses leads to dealing with the product cost and profitability without taking in consideration the overhead costs for both labor and material. Accordingly, this method suggests the correlation between the variable costs of both material and labor and the product price. Accordingly, one can see the high allocated overhead cost for the flow controller because of its higher material price and not because of its higher activity costs,