Case 5-4 Wilson Electronics

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Final Exam

Case 5-4 Wilson Electronics

Christine Keltz

Advanced Managerial Accounting – ACC 561

Professor Blix

December 19, 2010

Table of Contents

Wilson Electronics 3

The ABC Model as presented by Sally Jones 3

Ed Branson’s Resource Spending Point of View 4

To ABC, or Not to ABC 7

The Strategic Needs of Wilson Electronics 8

Wilson Electronics

Wilson Electronics builds components such as ducts, connectors and junction boxes used in power and data cable installation. The firm’s strategy is to “offer superior quality products and customer service at competitive prices.” In 1998, Wilson, with the support of Mike Foster, the controller at that time, decided to develop an ABC cost accounting model. The ABC model was designed to isolate idle capacity as a cost to the company, not as a cost to be charged to the customer. Before Foster was able to fully implement the ABC system, he decided the leave the company.

Alice Johnson is the new controller at Wilson Electronics and was briefly introduced to the ABC model by Foster. The president of the company, Bill Simms, has asked Alice to substantiate the potential value of the ABC system at the upcoming management team meeting. Ms. Johnson has decided to use the A12 Junction Box re-design proposal to provide the “proof of concept” needed to sustain the system.

Alice has called her own meeting with Sally Jones (Cost Accounting Manager), Ed Branson (Head of the Industrial Engineering group), and Phil Markley (Assistant Controller). The cost efficiencies of the ABC system are being compared to a more traditional resource spending point of view.

The ABC Model as presented by Sally Jones

Sally Jones supports the ABC model and its “what-if” capability. With the ABC system, each activity is measured and assigned a cost. As the frequency of the activity is reduced, the overall cost is also reduced. “Activity-based costing attempts to overcome the perceived deficiencies in traditional...