danshui plant no.2
Introduction and Main Issue
Danshui was a contract manufacturer in Southern China that assembled electronic products for companies wishing to save labour cost. Manufacturers like Danshui assembled parts in large plants using assembly line techniques according to specifications of the international companies that contracted with them for assembly and final testing. Danshui has a one-year contract with Apple Inc. to assemble 2.4 million iPhones4 in Plant No.2, which assembling computer hard drives on a contract that was fulfilled at the end of May 2010. However, in the first three months of the contract, the plant is unable to assemble as many phones as expected and is operating at loss. Wentao Chen, manager of Danshui Plant No.2, called Jianye Ma, plant controller, to request a summary of monthly operations for August. The report was shown that the revenue was below budget, material usage seems good, and labour costs were above budget. For plant profit, the budget was $100,000 but actually had a loss of $672,000. The plant manager must analyse the budget and prepare a summary of monthly operations to help identify the source of performance problems. In addition, the assembly process for an iPhone is complicated, with 140 steps involving over 100 components. The plant manager considers whether a flexible budget would be more useful for uncovering problems than the static budget currently being used.
The main issue for this case is the break of contract between Danshui and Apple. The contract called for Danshui to assemble 2.4 million iPhones4 in the period of one year. However, now in the third month of the contract, production was only 180,000 units per month. It was shown that they were unable to produces 200,000 units of iPhone4 in any of the three months that have been worked on this contract. This may be happen because they cannot find qualified labour to hire
Danshui was a contract manufacturer in Southern China that assembled electronic products for companies wishing to save labour cost. Manufacturers like Danshui assembled parts in large plants using assembly line techniques according to specifications of the international companies that contracted with them for assembly and final testing. Danshui has a one-year contract with Apple Inc. to assemble 2.4 million iPhones4 in Plant No.2, which assembling computer hard drives on a contract that was fulfilled at the end of May 2010. However, in the first three months of the contract, the plant is unable to assemble as many phones as expected and is operating at loss. Wentao Chen, manager of Danshui Plant No.2, called Jianye Ma, plant controller, to request a summary of monthly operations for August. The report was shown that the revenue was below budget, material usage seems good, and labour costs were above budget. For plant profit, the budget was $100,000 but actually had a loss of $672,000. The plant manager must analyse the budget and prepare a summary of monthly operations to help identify the source of performance problems. In addition, the assembly process for an iPhone is complicated, with 140 steps involving over 100 components. The plant manager considers whether a flexible budget would be more useful for uncovering problems than the static budget currently being used.
The main issue for this case is the break of contract between Danshui and Apple. The contract called for Danshui to assemble 2.4 million iPhones4 in the period of one year. However, now in the third month of the contract, production was only 180,000 units per month. It was shown that they were unable to produces 200,000 units of iPhone4 in any of the three months that have been worked on this contract. This may be happen because they cannot find qualified labour to hire