In a business memo, answer the following questions, directing your responses to Robert Parker, the president of Wilkerson Company.  Keep your answers succinct.  Assume that Mr. Parker knows all of the background information, so there is no need to repeat it.  Your memo should be no more than three pages, single spaced (two for the memo, one for calculation tables).

1.What insights does ABC provide over the current overhead allocation method?

2.What are the cost allocation rates using ABC at full capacity (as compared to actual capacity)?  There’s no need to actually allocate overhead using the full capacity rates.  Just calculate the full capacity cost driver rates for each activity (for example, $30/machine hour for machine related expenses for actual capacity).

3.Should Wilkerson use actual capacity or full capacity costs under the ABC method?  Why?

4.What suggestions do you have for Mr. Parker and Wilkerson Company?  Be specific, with support for your answers.