...Case #3 Danshui Plant No.2 Answers 1. The break-even point for Danshui plant no 2 is 175874.54 units. The calculation of this number is simply from the break-even formula, fixed costs divided by contribution margin per unit. Fixed costs for the plant were 729 000 and the contribution margin is revenue minus variable costs which equals to 829 000 and the CM per unit is 829 000 / 180 000 which is 4,145. The break-even is therefore 175874.54 units. 2. The actual and expected cost per unit was 211,919 and 205,705 respectively. These numbers can be computed simply by dividing the total cost given in preliminary report-Exhibit 3 of the case- by the number of units. For actual cost per units it would be actual total costs which is 38 148 divided by 180 000 which will give 205.705 and for the expected cost per units, it is 41 140 divided by 200 000 which will give 211,919. 3. See exhibit 1 4. The price variance for the flash memory is equal to 362 000, it is calculated by multiplying 181 000 which is the actual quantity by the price difference (29-27) which is 2. The reason why the actual quantity is 181 000 and not 180 000 is because of the fact that in the production process, there were a thousand flash memories that were damaged. Therefore they actually used 181 000 flash memories. The usage variance is 27 000 and it is calculated by multiplying the standard price which is 27 by the quantity difference which is 1 000 (181 000- 180 000). The...
Words: 797 - Pages: 4
...Danshui Plant No.2 Case Study Yuli Tang Rui Zhang Due Date: April 9, 2013 1. As we can see from the Exhibit 1, 176,087 Apple iPhone 4’s would have to have been completed for Danshui Plant No.2 to break even. 2. The total expected cost per unit was $205.7 per unit and the actual cost per unit was $211.93 per unit. See Exhibit 2. 3 & 4. The data is showing in the Exhibit 3 & 4. 5. From the data of question 3, the variance of revenue is favorable because Apple increased price of flash memory by $2. However the company didn’t gain profits from the revenue due to the increased price of flash memory provided by Samsung. The variance of flash memory is unfavorable because of two reasons: first reason is the price of each unit raised $2; the second reason is the company damaged 1,000 units of flash memory. So company used more flash memories than expected. The variance of 8 other chips is favorable, we cannot say the amount of chips decreased, so it should be the price of chips went down. The variance of supplies and tools is unfavorable. We think there are two reasons: company used the supplies and tools less efficient which means used more of supplies and tools, or company spend more money on purchase supplies and tools. The variance of labor is unfavorable, due to the wages of labor increased and working hours also increased, it was inefficient. The supervision is unfavorable because of the salary of supervisor increased. In conclusion, the actual net income is...
Words: 939 - Pages: 4
...Danshui Plant No.2 1. Variable Costs = Material Cost + Labor Cost + Shipping Cost = 187.89+13.11+1.06 = 202.06 / Unit Fixed Costs = 729,000 / Month Price = 41,240,000 / 200,000 = 206.2 Contribution Margin = 206.2-202.6 = 4.14 / Unit When it comes to the break even, Contribution margin * Unit(BE) = Fixed Costs. Unit(BE) = 729,000 / 4.14 = 176,086.96， So the break even for Danshui is 176,087. 2. Based on the data in Exhibit 3, Total expected cost / Unit = 41,140,000 / 200,000 = $205.7 / Unit Actual cost / Unit = 38,148,000/180,000 = $211.93 / Unit 3. Flexible Budget | Budget(180,000) | Actual(180,000) | Variance | Revenue | 37,116 | 37,476 | 360 F | Variable Costs: | | | | Materials | | | | Flash memory | 4,860 | 5,249 | 389 U | Application process | 1,935 | 1,935 | | Chips-phone | 2,529 | 2,529 | | Gyroscope | 468 | 468 | | 8 other chips | 12,771 | 12,643 | 128 F | Variable supplies and tools | 11,257.2 | 11,305 | 47.8 U | Subtotal | 33,820,2 | 34,124 | 303.8 U | Labor | | | | Assembly and packaging | 2,359.8 | 3,092 | 732.2 U | Shipping | 190.8 | 191 | 0.2 U | Total variable costs | 36,730.8 | 37,412 | 1041.2 U | Fixed costs: | | | | Factory rent | 400 | 400 | | Machine depreciation | 150 | 150 | | Utility fee and taxes | 52 | 52 | | Supervision | 127 | 134 | 7 U | Total fixed costs | 729 | 736 | 7 U | Total costs | 37,099.8 | 38,148 | 1,048.2 U | Net income...
Words: 335 - Pages: 2
...Introduction Danshui was a contract manufacturer that assembled electronic products located in Southern China. Danshui has a contract to assemble 2.4 million iPhones within the period from 1st June 2010 to 31st May 2011 and their current production is only 180,000 units per month compared to planned production is 200,000 units. Danshui is using semiskilled labor for less than 1 dollar an hour and assembly line technique. Due to high demand of IPhone 4, Apple had contracted with Danshui to assemble iphones in Plant No. 2. A budget had been prepared soon after iPhone contract was signed. Therefore, Danshui plant manager, Wentao Chen was responsible to control all costs including materials, labor, overhead and shipping. IPhone 4 contained more than 100 components including flash memories, application processor, chip for phone calls, gyroscope and etc. Therefore, each worker will need to focus more than one task in a short period of time due to its assembly line toward completion. The assembly process entirely based on handwork by workers, where there are 140 steps in assembly process to be done by 325 individuals during 5 working days. The August Report had shown a loss of $672,000 although budget is $100,000, this is due to unable to produce 200,000 iPhone 4 units on demand. The major obstacle is not hiring enough qualified labor although wages was raised by 30% since July. Besides, flash memory installation also causing a trouble where they can be damaged by heat if not...
Words: 3021 - Pages: 13
...1. Danshui Plant No 2 Case Study Free Essays 1 - 30 www.papercamp.com/group/danshui-plant-no-2-case-study/page-0 Search Results for 'danshui plant no 2 case study'. Displaying 1 - 30 of 1,500. Case Studies Of Corporate Firms. : distribution of wafer production lines, 1995 ... 2. Danshui Plant No. 2 Case Study features.rr.com/article/080P6pegST5Zp?q=iPhone 1) Using budget data, 176087 iPhone 4's must be completed on a monthly basis in order for Danshui Plant No. 2 to break even. The first step is to calculate the ... 3. Danshui Plant No. 2 - Harvard Business Review hbr.org/product/danshui-plant-no-2/an/913525-PDF-ENG Sep 28, 2012 – Danshui Plant No. 2 in southern China has a one-year contract with Apple Inc. to assemble 2.4 mil... 4. [PDF] Danshui Plant No. 2 - Cool Tutoring www.cooltutoring.com/uploads/1/1/9/0/.../913525-pdf-eng_copy.pdf File Format: PDF/Adobe Acrobat - Quick View Aug 3, 2010 – In August 2010, Wentao Chen, manager of Danshui Plant No. 2 in southern China, was anxious. The plant was in the third month of a 12-month ... 5. Danshui Plant No. 2 - Case - Harvard Business School www.hbs.edu/faculty/Pages/item.aspx?num=43379 Danshui Plant No. 2 in southern China has a one-year contract with Apple Inc. to assemble 2.4 million iPhones. In the first three months of the contract, the plant ... 6. Danshui Plant No. 2 - Sport Balla www.sportballa.com/2013/03/plant-2-danshui-no - United States Danshui Plant No. 2. Source: Term Paper Warehouse , Mar 31 2013,...
Words: 531 - Pages: 3
...DANSHUI PLANT NO. 2 CONTENTS | PAGE | 1.0 Introduction | | 2.0 Main issue | | 3.0 Problem statement | | 4.0 Data Analysis 4.1 Breakeven analysis 4.2 Total cost variance analysis 4.3 Flexible budget performance analysis 4.4 Variance analysis | | 5.0 Strategies, interpretations, recommendations and justifications | | 6.0 Conclusion | | 7.0 References | | 1.0 INTRODUCTION Danshui Plant No. 2 in southern China has a one-year contract with Apple Inc. to assemble 2.4 million iPhones. In the first three months of the contract, the plant is unable to assemble as many phones as expected and is operating at a loss. The plant manager must analyze the budget and prepare a summary of monthly operations to help identify the source of performance problems. The plant has had difficulty hiring enough workers despite raising wages over 30%. In addition, the assembly process for an iPhone is complicated, with 140 steps involving over 100 components. The plant manager considers whether a flexible budget would be more useful for uncovering problems than the static budget currently being used. Wentao Chen, manager of Danshui was anxious upon reviewing the monthly operation’s performance for August as in the third month of the contract, production was only about 180,000 units. Meanwhile, Jianye Ma, the plant controller requested a summary of monthly operations for August as soon after the end of the month as possible. 2.0 MAIN ISSUE Danshui Plant manager Wentao...
Words: 2997 - Pages: 12
...Introduction Danshui Plant No.2 is a contract manufacturer locating in southern China and was assembles electronic products for companies wishing to save labor costs and they are using semiskilled labor for less than 1 dollar an hour. In August 2010, Danshui Plant No.2 in southern China has a 1 year contract in the period between 1 June 2010 and 31 May 2011 with Apple incorporation to assemble the Apple iPhone 4. Based on the contract, Danshui need to assemble 2.4 million iPhones within 1 year. However, Wentao Chen, manager of Danshui Plant No.2 was anxious about the plant is not able to assemble 2.4 million as their expected and is operating at a loss when the third month of the contract. Their current production was only 180,000 units per months compared to their planned monthly budget is 200,000 units. Therefore, manager was called the plant controller to analyze the budget and request a summary of monthly operations for August as soon after the end of the month as possible in order to identify the source of performance problem. Problem statement In the contract between Apple and Danshui Plant No.2, Danshui need to assemble 2.4 million iPhone within 1 year. This means that Danshui need to produce 200,000 units iPhone 4 per month but now in the third month of the contract they only produce 180,000 per month. Therefore, there are unable to assemble the iPhone 4 within 1 year this may because of they are lack of qualified labor. Danshui Plant No.2 are employs those semiskilled...
Words: 1750 - Pages: 7
...REFERENCES 12 INTRODUCTION AND MAIN ISSUES Danshui was a contract manufacturer that assembled electronic products for companies wishing to save labour costs by locating in southern China. Because of high demand for iPhone 4, Apple had contracted with Danshui to assemble iPhone in Plant No. 2. The contract need Danshui to assemble 2.4 million iPhone in the period between June 1, 2010 and May 31, 2011. Wentao Chen, manager of Danshui Plant No. 2 was worried because in the third month of the contract production was only 180,000 units per month. Suppose to produce 2.4 million iPhone its need 200,000 units per month. After preliminary budget has come out, the company loss of $672,000. The main issue of this case is the break contract between Danshui and Apple. The contract called Danshui to assemble 2.4 million in the period of one year, but Danshui only can produce 180,000 units per months. If Danshui still can produce that amount, it can’t reach 2.4 million in one year. This might happen because Danshui cannot find people to hire, even though they have raised wages by almost 30%. Another reason is they have problem with the Samsung flash memory installation. One thousand flash memories were damaged in August. Samsung is aware of this problem and has begun to install a shield to prevent the damage. However, it is just for prevention in the short time. Due to the contract has not been fulfilled, Danshui may be needed to pay back a lot of money for the contract and...
Words: 2251 - Pages: 10
...Contents INTRODUCTION................................................................................................................................... 1 IDENTIFICATION OF THE MAIN ISSUES OR PROBLEMS............................................................... 2 ANALYSIS OF CASES: ......................................................................................................................... 3 Analysis Of Data ............................................................................................................................. 3 Analysis Of Flexible Budget ............................................................................................................ 4 RECOMMENDATION ........................................................................................................................... 7 Increase Labor’s Wages ................................................................................................................... 7 Giving Reward ................................................................................................................................ 7 Training and Courses ....................................................................................................................... 7 Outsourcing or Sub Contract ............................................................................................................ 8 Overtime Payment ...................................................................................
Words: 2543 - Pages: 11
...Running head: DANSHUI PLANT NO.2 Danshui Plant No.2 YourFirstName YourLastName University title 1 DANSHUI PLANT NO.2 2 1). Explain briefly contribution margin. How is it calculated? An accounting contribution margin refers the revenues less variable expenses. This implies that it reveals how much a company's revenues contribute strictly to the company's fixed expenses . The total amount for the company, the amount for each product line, the amount for a single unit of product, and as a ratio or percentage of net sales are the most important concepts in the presentation of the contribution margin. The contribution margin can be presented as 1) the total amount for the company, 2) the amount for each product line, 3) the amount for a single unit of product, and 4) as a ratio or percentage of net sales (Libby, Libby and Short, 2011). There is a form of management accounting known as cost-volume-profit analysis. It, the contribution margin, that is, the marginal profit per unit sale, is a very vital quantity in determining various calculations. For this reason, it also applies in the measurement of the operating leverage. Typically, contribution margins on a lower scale are normally evident in the labor-intensive tertiary sectors. On the other hand, it is in the capital-intensive industrial sector that we witness high contribution margins being prevalent (Kaplan and Atkinson, 2005.). In the case of a manufacturer, the contribution margin is the total...
Words: 2329 - Pages: 10
...MAIN ISSUE A part from reading the Danshui Plant No.2 case, we can see that there is no enough information to evaluate the performance of the pant for the first three contracts to assembly Apple iPhone 4. Analysis of the issue To get a clear picture a flexible budget was prepared for the month end of August 2010. (Shown in the table below) From the flexible that is prepared it can seen the performance of Danshui Plant NO.2 is not good enough as what it suppose to be. The budget show that Danshui has unfavorable variance in the assembly the flash memory part, variable tools and supplies, assembly and packing, shipping nad the last one on the supervision. As for the flash memory it has been stated that Samsung had raised the price by $2.00 which had been cover by the Apple as their neutralized the profit which supposedly to give a favorable variance. But for the budget it can seen that the flash memory is showing an unfavorable variance. This is due to lack of skills during the installation the labour which had lead wastage as they need to replace the damage flash memory with the new one. The replacement of the flash memory due wastage had increased the cost that is expected which had lead to unfavorable variance. Variable supplies and tools show an unfavorable variance has it has connection with installation of parts in the iPhone 4 especially on the flash memory installation part. .so when the labour done a wastage or reckless job during the installation of flash memory...
Words: 1349 - Pages: 6
...Overview: Apple Corporation released iPhone 4 on June 24, 2010 and sold more than 1.7 million units in the first three days. To prepare for the launch of the new product, Apple contracted with the Danshui Plant No. 2 to assemble the new iPhones. Danshui Plant No.2, a contract manufacturer in southern China that assembles electronic products for companies wishing to save on labor costs, received a one-year contract starting on June 1, 2010 with the Apple Corporation to assemble 2.4 million iPhone 4s. In the first three months of the contract it became obvious that the plant was unable to assemble the expected 200,000 iPhones per month and was operating at a loss. Although the plant is known for hiring semi-skilled workers, the new iPhone contract required a complex assembly process entirely based on handwork by 325 workers, with 140 steps involving 100 components during 5 days. To anticipate the need for qualified workers, Danshui had raised their factory wages by almost 30%. But even with the wage increase, Danshui was not able to hire enough qualified workers to assemble the complex new product. Another issue was that, based on original modeling, Danshui was actually operating at a loss and was unable to fill the expected 200,000 per month iPhone quota in the first three months. To begin analyzing the root causes for the shortfall, the controller had considered preparing a “flexible budget” to provide a more realistic comparison of the performance to the budget. If the...
Words: 2032 - Pages: 9
...Danshui Plant No.2 The following case focuses on Danshui, a contract manufacturer that assembled electronic products. Danshui is currently in the third of a 12 months’ contract to assemble 2.4 million units of Apple’s iPhone 4. Monthly production target for Danshui is 200,000 units but three months’ study reflects that Danshui may not meet this target in 12 months and would also overrun the cost barrier thus landing in an unprofitable situation. Plant controller, Jianye Ma presented her analysis for August production to the plant manager, Wentao Chen. According to this report, the main difficult the plant is facing is being able to hire enough people to get the production to the 200000 units per month budgeted, despite having increased wages by a 30%. Questions 1. A. Total expected Cost – 41,140,000$ for 200,000 units ------------------------------------------------- Cost per unit – 205.70$ B. Actual Cost – 3,8148,000$ for 180,000 units ------------------------------------------------- Cost per unit – 211.91$ 2. The flexible budget variances can be seen in Appendix1. According to the results, there is an overall unfavourable variance of 1048.2$. this means, that even if production has been 180,000 instead of 200,000, there is still a variance NOT EXPLAINED by the reduction in volume. The colours in appendix one represent whether the impact of the variance is positive (green) or negative (red). It can be seen, that assembly and packaging represents the highest...
Words: 689 - Pages: 3
...Solution to Danshui Case Danshui Plant No.2 1. Variable Costs = Material Cost + Labor Cost + Shipping Cost = 187.89+13.11+1.06 = 202.06 / Unit Fixed Costs = 729,000 / Month Price = 41,240,000 / 200,000 = 206.2 Contribution Margin = 206.2-202.6 = 4.14 / Unit When it comes to the break even, Contribution margin * Unit(BE) = Fixed Costs. Unit(BE) = 729,000 / 4.14 = 176,086.96， So the break even for Danshui is 176,087. 2. Based on the data in Exhibit 3, Total expected cost / Unit = 41,140,000 / 200,000 = $205.7 / Unit Actual cost / Unit = 38,148,000/180,000 = $211.93 / Unit 3. Flexible Budget | Budget(180,000) | Actual(180,000) | Variance | Revenue | 37,116 | 37,476 | 360 F | Variable Costs: | | | | Materials | | | | Flash memory | 4,860 | 5,249 | 389 U | Application process | 1,935 | 1,935 | | Chips-phone | 2,529 | 2,529 | | Gyroscope | 468 | 468 | | 8 other chips | 12,771 | 12,643 | 128 F | Variable supplies and tools | 11,257.2 | 11,305 | 47.8 U | Subtotal | 33,820,2 | 34,124 | 303.8 U | Labor | | | | Assembly and packaging | 2,359.8 | 3,092 | 732.2 U | Shipping | 190.8 | 191 | 0.2 U | Total variable costs | 36,730.8 | 37,412 | 1041.2 U | Fixed costs: | | | | Factory rent | 400 | 400 | | Machine depreciation | 150 | 150 | | Utility fee and taxes | 52 | 52 | | Supervision | 127 | 134 | 7 U | Total fixed costs | 729 | 736 | 7 U | Total costs | 37,099.8 | 38...
Words: 341 - Pages: 2
...coursework from another student and submitting it as your own. Suspected plagiarism will be investigated and if found to have occurred will be dealt with according to the procedures set down by the university/college. The coursework must be done in group of 3/4 students and must be entirely your own work. Please make sure that you are aware of the rules concerning plagiarism. If you are unclear about them, please consult your program coordinator/lecturer. * The coursework should exhibit formal research skills i.e. with a table of content, proper citations, references, and appendixes. * The coursework write up must be able to demonstrate critical analysis and application of both theory and practical issues to the case that is given (Danshui Plant No. 2). * Student may include additional relevant data/information apart from the proposed guidelines in conjunction to your research. Additional marks will be awarded for such attempt. * Your coursework should not be more...
Words: 803 - Pages: 4
