How was the overhead rate of 185% of production run labor cost determined (formula only; no need of calculation)? What is the actual overhead rate for the current month? Is this difference the reason why gross margin of pumps fell from budgeted 35% to 5%? Calculate the monthly practical capacity and the capacity cost rates for each of Sippican’s resources: production and setup employees, machines, receiving and production control employees, shipping and packaging employees, and engineers. Using these capacity cost rates and the production data in Ex.3 and 4, calculate revised costs and profits for Sippican’s three product lines, per unit and in total. What difference does your cost assignment have on reported product costs and profitability? What causes any shifts in cost and profitability? Could this costing approach be extended to service companies and to companies much larger and more complex than Sippican? What would be the barriers and difficulties with implementing time-driven ABC in practice? Calculate the cost of unused capacity for March. Unused capacity is defined as practice capacity from Q2 subtracts capacity utlized to manufacturing all three products. On the basis of the revised cost and profitability estimates, what actions should Sippican’s management team take to improve the company’s profitability? questions to be answered
