Danshuiplantno.2 The case solution
Question:3
The material price variance has been determined by estimating a difference between the actual price and the standard price and then multiplying it with the actual quantity of 181,000 units. This will deliver us the material price variance of almost $362,000, respectively. Apart of that, the material usage variance is almost $27,000, which has been estimated by originating a difference between the actual quantity of 181,000 units and the standard quantity of 180,000 units and then multiplying that figure with the standard price of $27.00 per unit.
Furthermore, the labor rate variance is resulted by estimating a difference between the standard labor rate and the actual labor rate. As per Appendix 3;the standard labor rate is almost $13.04 per hour and the actual labor rate is $17.18 per hour. The actual hours have also been combined,which are 180,000 hours as per Appendix 3. Hence, the resulting labor rate variance is almost $745,000, which is an unfavorable variance.
On the other hand, the labor usage (efficiency) variance is almost $13,040as per Appendix 3 , which is a favorable variance. However, this has been estimated by taking into account the differentiation between the actual hours of 180,000 & the standard hours as per Appendix 3, which are 181,000. Thereafter, the difference has been multiplied with the standard labor rate of $13.04 per hour, which has resulted in the value-based upon the efficiency variance.
In addition to this, the overhead spending variance is $2,950as per the exhibits, which is a favorable variance. However, the procedure that has gotten affected while estimating the overhead spending variance is covered by the actual hour worked, which are: 181,000 hours, with an inclusion of the actual plus standard overhead rate. The actual overhead rate is $4.07 and the standard overhead rate is $4.05 as per Appendix 3.
Question:4
As per the information in the case; there is a need to either develop some strategies or to make decisions in direction to solve the problems that are connected to the iPhone 4’s contract in the next nine months. The issues being faced is the inefficiency of the labors as the assembly line is labor concentrated, but even though the price is raised by 30%; the labors are still functioning inefficiently, and the company is faced with the difficulty to find semi-skilled labor. The company must focus on this area and must be capable to inspire its employee towards increasing their efficiencies. Labor can be subcontracted if the company finds it difficult or else it could employ unskilled labor and train them to become semi-skilled or skilled employees of the company. Training could be organized, and promotions must be measured to increase the efficiency and inspiration level of the employees. On the other hand, there was unfavorable variance in the area of variable supplies and tools. It is projected that with new blaze from Samsung; the loss will be lesser in the coming months with the inclusion of other techniques, such as: careful handling and training, which would help in reducing the waste and thus, saving thousands of dollars.
The initial budget predicted that $100,000 would be earned potentially, but now it has curved into the loss, and thus, an efficient and effective amount must be reflected to escape this position in the upcoming years.....................
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