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Solution to Danshui Case

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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 | 38,148 | 1,048.2 U |
Net income | 16.2 | (672) | 688.2 U | 4. Material Price Variance for Flash Memory
= 5,249,000-27.00*180,000 = $388,800 U
Material Usage Variance for Flash Memory
= (180,000-200,000)*27 = 20,000*27 = 540,000 F

Labor Rate Variances
= [(3,092,000/180,000-2,359,800/180,000)]*180,000 = 732,200 U
Labor Efficiency Variances
= (180,000 – 200,000) X 13.11 = 262,200 F...

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