The setting of this case is the Recession of 1980. G. Wilson & Co. is a job shop that gets business by submitting the low bid. Robert Monroe, the controller, has been doing a trial run of direct costing. The case provides financial information for six months under both direct costing and absorption costing. The case can be used to illustrate the difference between absorption and direct costing, to show how direct costing and the contribution concept can be used in pricing, and to provide a vehicle for discussing cost allocation.
Darden Business Publishing – University of Virginia