Exhibit $1$ Sippican Corporation: Operating Results $($March $2006)$

Source: Casewriter.

Exhibit $2$ Product Profitability Analysis $($March $2006)$

$1.$ 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 $5\%?$

$2.$ 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.

$3.$ Using these capacity cost rates and the production data in Ex$\mathrm{.}3$ 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?

$4.$ 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?

$5.$ Calculate the cost of unused capacity for March. Unused capacity is defined as the practical capacity from Question $2$ subtracts capacity currently utilized to produce the three product lines. On the basis of the revised cost and profitability estimates, what actions should Sippican$$s management team take to improve the company$$s profitability?