Wilkerson Case Which Cost driver rates should be used actua

Wilkerson Case

Which Cost driver rates should be used : actual or capacity based? Why?

Solution

Actual Based Cost Driver rates should be used because Wilkerson should consider action targeted atcost reduction (changes in flow controllers design or in their production and delivery process) orraising the price of flow controllers for customers. Since flow controllers are customized, thecompany can set different prices for different customers (groups of customers) based on the actualamount of resources spent (e.g. implement activity-based pricing)