Shift 1 Shift 2

Total Minutes 450 450

Break 1 15 15
Break 2 15 15
Training / Education 30 30
Preventitive Maintence / Repair 30 30
Total Workable Minutes 360 360

Production Workers ?
Assembly Workers ?
Total non Setup Workers 75% 45
Setup Workers 25% 15
Total 100% 60

Total Machines 62 62
Available Minutes per shift 360 360
Monthly Costs 5400 5400

*setup required each time a batch of componenets was machined in a production run
*each component in a product required a separate production run to machine the raw material or purchased part t
*workers operated machines imultaneously once they had setup the machine
*25% of workers to setup
*some production workers did not operate any machines they performed only manual assembly work and was incl
 Shift 1 Shift 2
Total Minutes 450 450
Break 1 15 15
Break 2 15 15
Training / Education 30 30
Total Workable Minutes 390 390

People in Receiving / production / control 4 4

Time Needed to get once batch to machine for processing 75 75

*independent of whether proecuts were for a long or short production run

*independent of whether proecuts price point

People in packaging and shipping 14 14

Time needed to prepare package and labels 50 50
Time needed to bubble wrap 8 8
58 58
*independent of number or types of items
**indepedant of what type of item

ed in a production run
un to machine the raw material or purchased part to specifications for the product
p the machine

erformed only manual assembly work and was included in direct labor hour estimates for each product
 Shift 1
Total Minutes 450
Break 1 15
Break 2 15
Training / Education 30
Preventitive Maintence / Repair 30
Total Workable Minutes 360

Engineers 8
Monthly Salary 9750
Sippican Corporation: Operating Results

Sales $1,847,500
Direct Labor Expense $351,000
Direct Materials Expense $458,000
Contribution Margin $1,038,500
Margin 56.2%
Machine-related Expnses $334,800
Setup Labor $117,000
Receiving and production Control $15,600
Engineering $78,000
Packaging and Shipping $109,200
Total Manufacturing Overhead $654,600
Margin 35.4%

Total Gross Margin $383,900

Margin 20.8%

General, Selling and Admin Expense $350,000

Margin 18.9%

Operating Income (pre tax) $33,900

Margin 1.8%
185%
Product Profitability Analysis

Valves Pumps Flow Controllers

Direct Labor Cost $12.35 $16.25 $13.00
Direct Material Cost $16.00 $20.00 $22.00
Manufacturing Overhead $22.85 $30.06 $24.05
@ 185% of direct labor cost 185% 185% 185%
Standard Unit Costs $51.20 $66.31 $59.05

Target Selling Price $78.77 $102.02 $90.85

Planned Gross Margin 35% 35% 35%

Actual Selling Price $79.00 $70.00 $95.00

Actual Gross Margin $27.80 $3.69 $35.95
Actual Gross Margin 35% 5% 38%
Product Data

Valves Pumps Flow Controllers

Materials Per Unit 4 5 10
Materials Cost Per Unit $16 $20 $22
Direct Labor Per Unit 0.38 0.5 0.4
Machine hours Per Unit 0.5 0.5 0.3
Setup Hours Per Run 5 6 12
# of Units Valves Pumps Flow Controllers $ Per Unit Valves Pumps
2 3 4 $2 $2
2 2 5 $6 $7
1
Flow Controllers
$1
$2
$8
Monthly Production and Operating Statistics (March 2006)

Valves Pumps Flow Controllers

Production (units) 7,500 12,500 4,000
Machines hours (run time) 3,750 6,250 1,200
Production runs 20 100 225
Setup Hours (labor and machines) 100 600 2,700
Number of shipments 40 100 200
Hours of engineering work 60 240 600

Average Machine Hours 2.0 2.0 3.3

Average Production Runs 375.0 125.0 17.8
Average Setup Hours 0.2 0.2 0.1
Average Shipments 187.5 125.0 20.0
Average Engineering Work 125.0 52.1 6.7

Minutes 50 50 50
Minutes 8 8 8
Production Minutes 2,000 5,000 10,000
Packaging Minutes 60,000 100,000 32,000
Total Minutes 62,000 105,000 42,000
Per Minute $ $0.50 $0.50 $0.50
Total $ Packaging and Shipping $31,000.00 $52,500.00 $21,000.00

Minutes 75 75 75
Production Minutes 1,500 7,500 16,875
Per Minute $ $0.50 $0.50 $0.50
Total $ Receiving and Production $750.00 $3,750.00 $8,437.50
 Total
24,000
11,200
345
3,400
340
900

--
--
--
--
--
 Paid Days Paid Hours Actual Hours
per Month Per Shift Worked per Day

Direct* 20 7.5 6.0

Indirect** 20 7.5 6.5
Machines 20 -- 12.0
Engineers 20 7.5 6.0

*Includes Production and Setup

**Includes Receiving / Control, Packing / Shipping

Receiving &
Production Setup
Control
Total Minutes 450 450 450
Break 1 15 15 15
Break 2 15 15 15
Training / Education 30 30 30
Preventitive Maintence / Repair 30 30 --
Total Workable Minutes Per Shift 360 360 390
Total Workable Hours Per Shift 6.0 6.0 6.5

# of Employees / Machines Per Shift 45.0 15.0 2.0

# of Shifts Per Day 2.0 2.0 2.0

# of Employees / Machines Per Day 90.0 30.0 4.0

 Total Total Cost
Paid Hours Total Cost per
Monthly Per
per Month Hour
Cost Minute
120 $3,900 $32.50 $0.54
130 $3,900 $30.00 $0.50 $109,200.0
240 $5,400 $22.50 $0.38
120 $9,750 $81.25 $1.35

Packing &
Engineers Machines
Shipping
450 -- --
15 -- --
15 -- --
30 -- --
-- --
390 -- --
6.5 6.0 6.0

14.0 8.0 62.0

2.0 1.0 1.0

28.0 8.0 62.0

Sippican Corporation: Operating Results
Total Valves

# of Units -- 7,500
Tagetted Selling -- $79
Sales $1,847,500 $592,500
Direct Labor Expense $351,000 $92,625
Direct Materials Expense $458,000 $120,000
Total Direct Expense $809,000 $212,625
Contribution Margin $1,038,500 $379,875
Margin 56.2% 64.1%
Machine-related Expnses $334,800 $86,625
Setup Labor $117,000 $3,250
Receiving and Production Control $15,600 $750
Engineering $78,000 $4,875
Packaging and Shipping $109,200 $31,000
Total Manufacturing Overhead $654,600 $126,500
Margin 35.4% 21.4%

Total Spending $1,463,600 $339,125

Total Gross Margin $383,900 $253,375
Margin 20.8% 42.8%

General, Selling and Admin Expense $350,000 --

Margin 18.9% --

Operating Income (pre tax) $33,900 --

Margin 1.8% --
 Flow Not full
Pumps
Controllers utilization
12,500 4,000 24,000
$70 $95 $0
$875,000 $380,000 $0
$203,125 $52,000 $3,250
$250,000 $88,000 $0
$453,125 $140,000 $3,250
$421,875 $240,000 ($3,250)
48.2% 63.2% --
$154,125 $87,750 $6,300
$19,500 $87,750 $6,500
$3,750 $8,438 $2,663
$19,500 $48,750 $4,875
$52,500 $21,000 $4,700
$249,375 $253,688 $25,038
28.5% 66.8% --

$702,500 $393,688 $28,288

$172,500 ($13,688) ($28,288)
19.7% (3.6%) --

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