Acct Case Study

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1.Expected Margin of Safety:

Sales Price per unit: 41,240,000/200,000 units
=$206.2/unit

Var. Cost/unit: 40,411,000/200,000
= $202.055/unit

Break-even sales:
206.2X = 202.055X + $729,000
4.145X=729,000
=175874.5476 units @ $206.2/unit
=36,265,331.72

MOS=Total sales – Break even sales
=41,240,000-36,265,331.72
=S4,974,668.3

MOS (units)
=Sales(units) - break even amount of units
200,000-175874.5476 units
=24,125.45 units

MOS as a percentage:
=MOS / Total sales
=4,974,668.3/41,240,000
=.1206…
=12.06%

2.) Expected cost per unit vs. actual cost per unit

Expected Cost/unit:
VC+FC/units
40,411,000+729,000/200,000
= $205.70/unit

Actual:
VC+FC/units
37,412,000+736,000/180,000
= $211.93/unit

3. ( Thousands of US dollars)
| Standard Cost| Flexible Budget| Actual| Flexible Budget Variance| | | (per unit)| (180,000 units)| (180,000 units)| | | Revenue| $ 206.2| $ 37,116| $37,476| $360| F|
Variable Costs:| | | | | |
Materials| | | | | |
Flash memory| 27| 4,860| 5,249| 389| U|
Application Process| 10.75| 1,935| 1,935| 0| |
Chips-phones| 14.05| 2,529| 2,529| 0| |
Gyroscope| 2.60| 468| 468| 0| |
8 other chips| 70.95| 12,771| 12,643| 128| F|
| 125.35| 22,563| 22,824| 261| U|
| | | | | |
Variable supplies and tools| 62.54| 11,257.2| 11,305| 47.8| U| Labor| | | | | |
Assembly and packing| 13.11| 2,359.8| 3,092| 732.2| U| Shipping| 1.06| 190.8| 191| 0.2| U|
| | | | | |
Total variable cost| 202.06| 36,370.8| 37,412| 1,041.2| U| | | | | | |
Fixed Costs:| | | | | |
Factory rent| | 400| 400| 0| |
Machine depreciation| | 150| 150| 0| |
Utility fee and taxes| | 52| 52| 0| |
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 (Flash Memory)

Actual Price (AP): $27 (Standard price) + $2 ( Increased price from Samsung) = $29
Note:
· There was 1,000 units of flash memory destroyed and therefore would need to be replaced. Due to this unfortunate event, Samsung would need to increase the price of each unit by $2.00 from installing a shield to prevent it from being exposed to heat.

Standard Price (SP): $27 (States in the book, Exhibit 1)

Actual Quantity (AQ): 1,000 units of additional flash memory + 180,000 units of flash memory (existing) = 181,000 units of flash memory.
Note:
· 1,000 units of flash memory were destroyed in August and was also replaced in August.
Standard Quantity (SP): 180,000 units ( Actual quantity in exhibit 3)
* Assume that 1 iPhone 4 only uses 1 flash memory.

AP (Actual Price)| $29|
SP (Standard Price)| $27|
AQ (Actual Quantity)| 181,000 units|
SQ (Standard Quantity)| 180,000 units|

Calculations:

MPV = (AP-SP) x AQ

= (29 -27) x 181,000= $362,000 (U)

MUV = (AQ-SQ) X SP

= (181,000-180,000) X 27 = $27,000 (U)

Labor

Notes:

Because we do not know the total Actual Quantity (AQ) of Labor hours we have developed a new formula from the original formula of LPV= (AP-SP) X AQ.

AP X AQ| 3,092 (EXHIBIT 3)|
AQ X SP*| 3,092 / 1.3 = 2,378.462|
SQ X SP| 2,359.8 (Based on part 3 flexible budget)|

* We divided it by 1.3 because it was stated in the case that there was a 30% increase in the expected total labor cost, which was already implied in the 3,092 stated in exhibit 3. That means that expected labor costs was 30% below 3,092.

Calculations:

LPV (In thousands) = (AP – SP) X AQ

= AP*AQ-AQ*SP

= 3,092 – 2,378.462...
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