Last Updated 16 Jun 2020

# Danshui Plant No. 2

Essay type Research
Words 330 (1 page)
Views 165

Questions:
Danshui Plant No. 2
1. Using budget data, how many Apple iPhone 4’s would have to have been completed for Danshui Plant No. 2 to break even?

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2. Using budget data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocated to planned production? What was the actual cost per unit of production and shipping.

3. Prepare a flexible budget for 180,000 iPhone 4’s and calculate flexible budget variances using actual costs for August.

4. Estimate material price and usage for flash memories, labor rate and usage (efficiency) variances, and the overhead spending variance for August.

5. What are some strategies or decisions that Wentao Chen should consider in trying to solve the problems with the apple iPhone 4 contract in the next nine months? How would these change the costs and profitability of Danshui Plant No. 2 and the iPhone 4 contract?

1.
Revenue = 41,240/200 = \$206.20
Variable Cost = 125.35 + 62.54 + 13.11 + 1.06 = \$202.06
Fixed Cost = \$729,000

Contribution Margin = 206.20-202.06 = \$4.14
Break Even = 729,000/4.14 = 176,086.96

2.
Total Expected Cost/Unit = 41,140,000/200,000 = \$205.70
Actual Cost/Unit = 38,148,000/180,000 = \$211.93

3.
Material Usage Variance: (180,000 – 200,000) X 27 =20,000 X 27 = 540,000 F
Material Price Variance: (29.16-27.00) X 180,000 =2.16 X 180,000 = \$388,800 U

Labor Rate Variances (15.36 – 11.8) X 180,000 =3.56 X 180,000 = 640,800 U Labor Efficiency Variances (180,000 – 200,000) X 11.80 =20,000 X 11.80 = 236,000 F

4. Exhibit 1 Standard Variable Costs for iPhone 4 (U.S. Dollars)

Bill of materials (per unit) Purchased chips:
Flash memory (Samsung) Application processor (Samsung) Chip for phone calls (Infineon) Gyroscope (STMicroelectronics) 8 other purchased chips Variable supplies and tools
Labor:?Assembly and packaging (per unit)
Shipping (per unit)
\$27.00 10.75 14.05
2.60 70.95
Source: Case writers and David Barbosa, “Supply Chain for iPhone Highlights Costs in China,” New York Times, July 6, 2010, p. B1. Exhibit 2 Budgeted Fixed Overhead per Month
\$125.35 62.54 187.89
13.11 1.06

Factory rent?Machine depreciation Utility fee and local taxes Supervision?Monthly fixed costs Source: Case writers
\$400,000 150,000 52,000 127,000 \$729,000

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