Case analysis Hussainara Khatoon and Ors. V. Home Secretary, State of Bihar, Patna
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Snake bite should always be considered as a medical emergency. Snake venoms are categorised based on different types of toxic components present in it. Venomous snake bite can affect nervous system as well as normal hemostasis . The most important th
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Felipe Calvette 200373708 MBA 780 Sippican Assigment
Sippican Case Analysis The Sippican Corporation operating results are far from the historical 15% margin expected due to the fact that the management choose to reduce the price accompanying the price reducing made it by their competitors to maintain the market share and sales volume. The price cut has affect Sippican profitability margins and draw attention to the operating results. Sippican operating results are based in a simple cost accounting system that charges each produced unit for direct labor and material cost, and allocated overhead cost to products as a percentage of production-run direct labor. The huge impact that the overhead cost has on the results (185% higher that the direct labor costs) lead Sippican controller Peggy Knight to form a task force to study them. Based on the data collect by this team I perform the bellow analysis. Inittitialy, I calculate the practical capacity of the Sippican Corporation and the capacity cost rates as show in the exhibit 1 and 2. Exhibit 1 Pratical Capacity
Engi ne e rs &sse mbl y 'ore rs e tup 'ore rs Machines Machines for component proce ssi ng ,eceiving and Production control 'ore rs Pacing and hipping 'orers
Number of Employees %# *#
Productive hours ! ! !
Days "# "# "#
Monthly Productive Capacity $"# $"# $"#
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Total Capacity (hours x employees)
%!# $### *!##
Exhibit 2 Capacity Cost ates
Engi ne er &sse mbl y 'ore rs e tup 'ore rs Machines Machines for component processing ,eceiving and Production control 'orers Pacing and hipping 'orers Mate ri al Cost Total Cost
Felipe Calvette 200373708 MBA 780 Sippican Assigment
The practical capacity and the cost rates are fundamental information to achieve the ABC cost for the product lines but they were not enough because they didn´t have enough information to convert all the cost drivers. At least to drivers didn´t have clear cost information, those cost drivers are Number of Shipments and Production runs. To obtain a cost associate to those drivers it was necessary to convert the activity into hours, so I turned to the Sippican case that describe the activities and how much time they consume, then I create the table of activity consumption hours. The formulas used were: Pack and Shipping – ((driver x 50 minutes) + (# of itens produced x 8 minutes)) divided by 60 minutes Receiving and Control – (drive * 75 minutes)
Exhibit 3
Activity cons&mption (o&rs %alves
P&mps
Pacing and hipping $#**-** $3.# 'orers (hours) ,eceiving and Production control ". $". 'orers (hours) 4 5sage obtain in Exhibit + and discription of activity
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Total
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These amounts in hours were used to convert cost of the activity into product cost. The product cost by unit show in the exhibit 4.
Felipe Calvette 200373708 MBA 780 Sippican Assigment
Once we have the product cost developed with the Activity-based cost approach we recalculate the Product Profitability and the Sippican Operating results. (Exhibits 5 and 6)
Conclusion: The previous analysis based on the simple account system adopted by the Sippican Corporation that use overhead allocation evenly distributed among products and based on direct labor cost were misleading the management into incorrect pricing and valuation of products. It is notable that the nature of the Flow controller product that require more set ups and engineer to attend to the customer specifications is consuming a high amount of the indirect resources and this a major effect on the product price. The recent increase of 10% in the flow controller price didn´t affects the demand for the product which may indicate that the product was marked down under regular price. Observing the profitability margin for products, Sippican Corporation should focus the efforts to reduce the difference among the use of resources by their product lines. There are several opportunities for improvement like reducing the variety of flow controllers, defining a minimum amount order or program the flow controller manufacturing for a specific period and pile up all orders. Another observation is that along with price reductions on the cost of flow controllers the actual margin of the flow controller is way below the other products and a new increase on the product price may be acceptable by costumers, but before deciding for that is necessary to analyze the competitors price and market demand.
Anyway, a decision should be made about the product mix, either to adjust the impact of flow controller over the indirect resources or to abandon the product line. The correct mix choice could allow a better optimization of resources and even allow some reduction in the overhead costs that are pressing the operating result.
