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    Dhanshui Plant

    Uploaded by

    Akanksha Nikita Khalkho
    Danshui Plant No. 2 produced Apple iPhones under contract. Using budget data, the summary calculates: 1) 175,875 iPhones would need to be completed to break even. 2) The expected cost per unit was $205.70 while the actual cost was $211.93. 3) A flexible budget was prepared for 18,000 iPhones and variances were calculated using actual costs. Material and labor rate variances were unfavorable while overhead was slightly unfavorable. 4) Strategies like reducing costs, material choices, and labor efficiency should be considered to solve contract problems and improve profitability for the plant and iPhone contract.

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    © All Rights Reserved
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    Dhanshui Plant

    Uploaded by

    Akanksha Nikita Khalkho
    334 views7 pages
    Danshui Plant No. 2 produced Apple iPhones under contract. Using budget data, the summary calculates: 1) 175,875 iPhones would need to be completed to break even. 2) The expected cost per unit was $205.70 while the actual cost was $211.93. 3) A flexible budget was prepared for 18,000 iPhones and variances were calculated using actual costs. Material and labor rate variances were unfavorable while overhead was slightly unfavorable. 4) Strategies like reducing costs, material choices, and labor efficiency should be considered to solve contract problems and improve profitability for the plant and iPhone contract.

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    Danshui Plant No. 2 produced Apple iPhones under contract. Using budget data, the summary calculates: 1) 175,875 iPhones would need to be completed to break even. 2) The expected cost per unit was $205.70 while the actual cost was $211.93. 3) A flexible budget was prepared for 18,000 iPhones and variances were calculated using actual costs. Material and labor rate variances were unfavorable while overhead was slightly unfavorable. 4) Strategies like reducing costs, material choices, and labor efficiency should be considered to solve contract problems and improve profitability for the plant and iPhone contract.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    334 views7 pages

    Dhanshui Plant

    Uploaded by

    Akanksha Nikita Khalkho
    Danshui Plant No. 2 produced Apple iPhones under contract. Using budget data, the summary calculates: 1) 175,875 iPhones would need to be completed to break even. 2) The expected cost per unit was $205.70 while the actual cost was $211.93. 3) A flexible budget was prepared for 18,000 iPhones and variances were calculated using actual costs. Material and labor rate variances were unfavorable while overhead was slightly unfavorable. 4) Strategies like reducing costs, material choices, and labor efficiency should be considered to solve contract problems and improve profitability for the plant and iPhone contract.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 7

    Danshui Plant No.

    1
    Q1 How many Apple iphone 4’s would have to be completed for danshui plant no.2 to break even using budget
    data ?
    Ans.
    By making use a use of
    Details Monthly budget (in thousands)
    budget , the number of
    Units 200 apple iphone 4 ‘s that
    would have completed in
    Total revenue $41240 order to break even are
    shown in this table
    Total variable costs(TVC) $40411

    Total fixed cost (TFC) $729

    Selling price per unit (SP) : (total $41240/200 = $ 206.20


    revenue/unit)

    Variable cost per unit : (TVC/units) $40411/200 = $202.06

    Contribution per unit : ( SP per unit- VC per $206.20- $202.06 =$ 4.14


    unit)

    Break even point :( TFC/ Contribution per $729,000/$4.14 = 175874.55


    unit ) =175,875 units

    2
    Q.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?

    Ans.

    No. of total expected $ 41,410,000 Actual total costs $ 38148000


    Costs

    No.of expected total 2,00,000 Actual total units 180000


    units

    Actual cost per unit 38148000 / 180000


    Expected cost per unit 41410000 /200000

    = $ 205.70 = $ 211.93

    3
    Q3. Prepare a flexible Budget for 18000 iPhone 4’s and calculate flexible variances
    using actual costs for August

    4
    Q4. Estimate material price and usage for flash memories, labor rate and usage (efficiency)
    variances, and the overhead spending variance for August
    Ans:
    Details Details

    Actual quantity 180000 Actual units 180000


    Actual Price 5249000/180000 = $29.161
    Actual rate $17.18
    Standard 200000
    quantity Standard units 200000

    Standard Price 5400000/200000 = $27


    Standard rate $13.11
    Material price Actual Quantity*(Actual Price-Standard Price)
    variance = 180000*(29.161-27) = 389,000 Labor rate Actual units*(Actual Rate - Standard Rate)
    variance = 180000*(17.18-13.11) = 732600
    Material Standard Price*(Actual Quantity - Standard
    quantity Quantity)
    variance = 27*( 200000-180000) = 540000 Labor efficiency Standard Rate*(Actual units- Standard units)
    variance = 13.11*( 200000-180000) = 262200

    $389000 - $540,000 = $151,000 Favorable $732,600 - $262,200 = $470,000 Unfavorable

    Overhead Spending Variance for August = $736000-$729000= $7000 Unfavorable


    5
    Q5 Strategies or decisions Wento Chan should consider to solve the problem with apple iphone 4 contract
    and how would these change the cost and profitability of danshui plant no 2 & iphone 4 contract.

    ● After doing lot of calculations and analysing the data we came to know that all expenses of the company were far
    more than estimated.
    ● The company experienced heavy losses due to less labour which came into light after calculating the labour rate
    variance which was unfavourable for the company .
    ● The main reason behind the heavy losses faced by the company was money spent on flash memories so this
    should be their main concern
    ● Considering the need of the hour and gravity of the situation the immediate step which the company should take is
    to reduce their costs and expenses which will result in higher profits initially
    ● There is a need for the company to think about some strategies or to make decisions so that problem related to
    iphone 4 contract can be solved in the next nine months
    ● Wento chan should also need to make decisions regarding the the material used in the manufacturing of iphone 4
    and the wages that they are paying and the number of qualified labour that will be needed in order to produce
    iphone 4

    6
    THANK YOU

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