Product Gross Margin Calculation vs. Product Contribution Margin Calculation Assigning the overhead costs to the products shows how profitable the products are after deducting all cost. However‚ it is important to find the appropriate method of overhead cost allocation. In Sippican’s case the traditional accounting method is used‚ which does not reflect the real resource usage of the different product lines. The correct method in this case would be to apply the time-driven ABC approach for cost
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Sippican Corporation According to the activity based costing‚ the manufacturing overhead should be apportioned in the following method The Direct Material cost per unit and the direct labour cost per unit for the valves‚ pumps and the flow controller is given below. Direct Material Direct Labour Total Units Cost/unit cost/unit Valves 7500 16 12.35 Pumps 12500 20 16.25 Flow Controller 4000 22 13 The total manufacturing overhead of $654600 should be apportioned based on the activity required for
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1 SIPPICAN CORPORATION CASE ANALYSYS 20229 Cost Management System 2 Executive Summary Company Overview Accounting method Production process Activities performed Q1. Should Sippican use a contribution margin approach? Explanation Q2. Capacity cost rates for resources Q3. a. Revised costs and profits b. Product costs and profitability analysis with the new allocation method. Cause of the shifts in values. Q4. What actions should the management take to improve
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Sippican Corporation Sippican Corporation Questions: 1. Given some of the apparent problems with Sippican’s cost system‚ should executives abandon overhead assignment to products entirely and adopt a contribution margin approach in which manufacturing overhead is treated as a period expense? Why or why not? Answer: Consider Sippican is a manufacturer company with multiple products‚ using simple cost accounting system that directly allocate factory overhead to unit of product entirely through
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The Sippican Corporation Cost System Analysis We were tasked with analyzing Sippican’s costing structure to determine if activity based costing can give a clearer picture of the company’s true costs. Currently‚ Sippican assigns overhead costs at a flat rate across all three products. (4-54c) Our analysis of cost and profitability reveals a dramatic difference between the cost to produce each product as reported using Sippican’s traditional costing structure and the detailed analysis
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the number of units produced per production run- it is 375 for valves and 18 for flow controllers per production run. This shows the reason for high overheads cost too. Hence it calls for checking the cost allocation system of the company. Since Sippican produces three different products which comprise of different components‚ processes for all three need to be customised and refined to bring in any kind of standards. Variations in batch size owing to the machining constraints etc. are brought in
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The primary advantage of a corporate form of business is that a corporation is a stand-alone entity‚ which means you are not personally liable for the assets and debts of the business. Incorporating protects your personal assets from lawsuits‚ debt collection and other business issues that can arise. The stand-alone entity also separates tax liabilities‚ which is another advantage. This means that the corporation’s taxes are separate from your personal tax liabilities. As a business
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You are required to prepare an investigative report on a recent corporate scandal that involved improper accounting practices or any form of financial scandal. Your report must include the following: an overview of the corporation a description of the scandal methodology - explaining the specific accounting impropriety that the company used. an explanation of how the firm managed to hide their accounting improprieties a discussion of who the scandal effected - both inside‚ and outside
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Reaction Essay: The Corporation The documentary The Corporation‚ directed by Jennifer Abbott and Mark Achbar and produced in 2004‚ although bias‚ opens many doors for discussion in regard to capitalism and the role of corporations in our lives. I found the documentary to be presented professionally‚ and filled with legitimate facts more so than extreme opinion. The documentary truly outlines the "all-pervasive" role the corporation has taken as the "world’s dominant institution". The film opens
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Corporation – A separate legal entity that has an existence at law that is separable from those who form it. It is a separate legal entity in the sense that it has an existence at law‚ but no material existence. * It is separate and distinct from its shareholders * A properly authorized agent may bind the corporation in contract with third parties. * Shareholders possess limited liability for the debts of the corporation‚ and creditors may look only to the assets of the corporation to
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