I'm only a year older than your sister, and seriously, sleep is vital. If she's sleeping at 12 and then getting up to go to school in the morning, chances are, she's not getting enough sleep. It'll wear her down and make it harder for her to concentrate. Her body also needs to recuperate, and she's probably still growing so sleep is important for that too. I go to a school where everyone stays up really late to do homework and then has to wake up very early (I get up at 5:30) to get to school, and I've seen the effects it can have over time.
I think 10 - 11 is a reasonable time; the earlier you get in bed, the earlier you can get started on actually falling asleep. Of course this entire post is hypocritical since I'm 15 and I think it's reasonable to not sleep at all as long as I have caffeine.