Read carefully the case study entitled Wilkerson Company and answer the following questions.

1. How does Wilkerson’s existing cost system operate? Develop a diagram to show how costs flow from factory expense accounts to products.
2. Develop and diagram an activity-based cost model using the information in the case. Provide your best estimates about the cost and profitability of Wilkerson’s three product lines. What difference does your cost assign- ment have on reported product costs and profitability? What causes any shifts in cost and profitability?
3. Based on your analysis for question 2, what actions might Wilkerson’s management team consider to improve the company’s profitability?