Wilmont Chemical Corporation Harvard Case Solution & Analysis

Wilmont Chemical Corporation manufactures a wide range of industrial products, including specialty chemical called SC. The company uses the actual costing system and the LIFO method of inventory. At the beginning of each year, the controller of the company estimates the total direct cost (omitting any allocation of production overheads) per unit of production of SC. Unfortunately, the market demand and sales prices are difficult to predict, as well as raw materials and direct labor. Monthly budgets are prepared in advance, and then compared with the actual results. Controller wondering if the financial statements of the company will be more "administratively appropriate" if the company has changed, it is estimated that the cost of the system, where the raw material is stored in the inventory cost estimates and finished products are stored in the estimates of production. The case provides information to compare actual performance over the last month with a budget amount. Students were asked to prepare three monthly statements of income: one using actual costing system of the company, one with an estimated cost of the system, as well as one using a hybrid costing system, which includes both actual and estimated costs. Then they were asked to take a position as to which of the three income statement presents the most managerially relevant information. "Hide
on E. Richard Brownlee II Source: Darden School of Business 3 pages. Publication Date: September 6, 2004. Prod. #: UV1741-PDF-ENG

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