 # Danshui plant no. 2 Harvard Case Solution & Analysis

DANSHUI PLANT NO. 2

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

By making a use of budget the number of Apple iPhone 4’s that would have completed in order to break even are 176087 units.

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?

As per the exhibits the total expected cost per unit is almost \$205.70 per iPhone and on the other hand the actual cost per unit of related to shipping and production is almost \$211.93 per iPhone.

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

By taking account of the flexible budget, which is based upon 180,000 iPhone 4’sit can be seen that there are some favorable and adverse variances by making use of the costs for the month of August.However, it is evident that the variance that has been derived based upon the variable costs is almost \$10,997 and it is favorable.

Moreover, the variance related to the labor cost is Adverse which is comprised of the Assembly and packaging and as well as shipping costs.However, as per the flexible budget the variance based upon the fixed costs is almost \$7,000 which is Adverse. Apart from that, the variance related to the total costs is almost \$10,258 and which is favorable. Lastly, the variance based upon the net income is \$11,962, which is Adverse variance.

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

The material price variance has been calculated by evaluating a difference between the actual price and the standard price and then multiplying it with the actual quanity of 181,000 units. This will in turn will provide us with the material price variance of almost \$362,000, respectively. Apart from that, the material usage variance is almost \$27,000 and this has been evaluated by deriving a difference between the actual quantity of 181,000 units and the standard quanity of 180,000 units and then multiplying that figure with the standard price of  \$27.00 per unit.

Moreover, the labor rate variance has been derived by evaluating a difference between the standard labor rate as well as the actual labor rate. As per the exhibits the standard labor rate is almost \$13.04per hour and the actual labor rate is \$17.18 per hour . The actual hours have also been incorporated which are 180,000 hours as per the exhibits. Hence, the resulting labor rate variance is almost \$745,000 and this is an Adverse variance.

On the other hand, the labor usage (efficiency) variance as per the exhibits is almost \$13,040 and this is a Favourable Variance. However, this has been evaluated by taking account of the difference between the actual hours of 180,000 and the standard hours as per the exhibits are 181,000. Thereafter, the difference has been multiplied with the standard labor rate of \$13.04 per hour which resulted in the value based upon the efficiency variance.

In addition to this, the overhead spending variance as per the exhibits are \$2,950 and this is a favourable variance. However, the procedure that has been applied in order to evaluate the overhead spending variance is comprised of the actual hour worked which are 181,000 hours and the actual plus standard overhead rate. The actual overhead rate is \$4.07 and the standard overhead rate is \$4.05 as per the exhibits.

What are some strategies or decisions that Went ao 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?

As per the information available in the case there is a need to devise some strategies or to make decisions in order to solve the problems that are related to the iPhone 4 contract in the next nine months. Hence, Wentao Chen will have to make a decision with regards to the quality of the material that has been used in the manufacturing of iPhone 4 as well as the wages that they are paying and the number of qualified labor that will be needed in order to produce iPhone 4...................

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