As per Wilkerson case, Causes for shifting in cost and
profitability are as below :
- Taking into account variability among products in demand for
indirect resources, high level of overheads and absence of linear
relationship between the volume of activity and volume of
production of individual products, we recommend to move from
traditional volume-based costing to activity-based costing.
- The company can also consider a set of action that might reduce
the cost of flow controllers: change their design, adjust the
production process to eliminate waste of resources, switch to batch
production and delivery to decrease the cost per unit associated
with production runs and number of shipments.