Given some of the apparent problems with Wilkerson's cost system, should executives abandon overhead assignment to products entirely by adopting a contribution margin approach in which manufacturing overhead is treated as a period expense? Why or why not?

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Business

Morgan Gibbs

6 May, 06:57

Given some of the apparent problems with Wilkerson's cost system, should executives abandon overhead assignment to products entirely by adopting a contribution margin approach in which manufacturing overhead is treated as a period expense? Why or why not?

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Kamila · Answer 1

Current issues in the framework by regarding fabricating costs as a period cost

Assembling overhead is evaluated bu increasing direct work with 300%. This estimation isn't exact and doesn't speak to how the genuine variable sub-costs that form the manufacturing overhead act for example machine related costs, arrangement work, getting and creation control, designing, bundling and sending. In spite of the fact that there could be a connection between the measure of direct work cost and the all out manufacturing overhead, this present strategy for estimation is dubious and ignores the real segments of manufacturing overhead.

Advantage of Product Cost

Increasingly exact impression of the inconstancy of the sources for example on the off chance that there are five factors, it is more precise than one.

Advantage of Period Cost

Treating manufacturing overhead as a period cost implies that it stays simpler to contrast Wilkerson's and a rival, given that contender likewise treats manufacturing overhead as a period cost for example it is simpler to analyze like-for-like