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Danshui Plant No.2

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Blackberry (formerly known as Research in Motion; Ticket:BBRY) is a Canadian software company that started out as a mobile handhelds manufacturer. The company started out by making smartphones that had the capability of sending, receiving and reading emails. The company had a huge growth starting 2003 when it introduced what is commonly known as convergent smartphones; phones capable of accessing emails, browsing the web, internet faxing and other wireless capabilities. Until the release of the iPhone 4 and the release of the Android operating system Blackberry was the leader in the smartphone market and the choice to go for both consumers and businesses. Blackberry has since then lost it’s market share in both areas through not being able to keep up it’s security while simultaneously making a large number of essential applications available and through bring-your-own-device policies that many businesses started to adopt. Currently, Blackberry has 4 main revenue generating departments; Blackberry Devices, Blackberry Enterprise Service, QNX, and the Blackberry Messenger. Blackberry has 4 devices under its newly developed Blackberry 10 OS. These devices are the Z10, Z30, Q5, Q10; a fully touch phone, a fully touch phablet, and two QWERTY devices. The acceptance of these devices has been horrible and the recent losses suffered by the company are stemmed from these devices. The old line of devices running on Blackberry 7 OS used to be and continue to have a greater level of acceptance by the market. As such, John Chen - the current CEO - has stated in their recent earnings report conference call that Blackberry plans to re-roll out their old devices at a highly discounted price to emerging markets. In addition, Blackberry plans to release 2 new devices: the Z3 and the Q20; a low-end device targeting emerging markets codenamed “Jakarta” and a high-end QWERTY device

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...Question for 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? Variable Costs: 187.89 + 13.11 + 1.06 = $202.06 per unit Fixed Costs: $729,000 per month Revenue: 41,240 / 200 = $206.2 per unit Contribution Margin = 206.2 - 202.06 = $4.14 per unit Break-even = 729,000 / 4.14 = 176,086.96 units Answer : 176,087 iPhones 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? Total Expected Cost per unit: 41,140,000 / 200,000 = $205.7 per unit Actual Cost Per Unit: 38,148,000 / 180,000 = $211.93 per unit 3. Prepare a flexible budget for 180,000 iPhone 4’s and calculate flexible budget variance using actual cost for August. Flexible Budget Actual Variance  Number of Units                 180,000             180,000                       -    *Values in Thousands of Dollars ($) Revenue                   37,116               37,476 360 F  Variable Costs:  Materials  Flash memory                     4,860                ...

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...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 plant does not analyze the root causes of the problems and find the alternatives ways, it will not be able...

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