Danshui Plant

1.
Variable Cost = 125.35 + 62.54 + 13.11 + 1.06 = $202.06/Unit
Fixed Cost = $729,000/Month
Revenue = 41,240/200 = $206.20/Unit
Contribution Margin = 206.20-202.06 = $4.14/Unit
Break Even = 729,000/4.14 = 176,086.96 Units
17,087 iPhone 4’s

2.
Total Expected Cost/Unit = 41,140,000/200,000 = $205.70/Unit
Actual Cost/Unit = 38,148,000/180,000 = $211.93/Unit

3. | Flexible Budget | Actual | Variance | # Of units | 180,000 | 180,000 | N/A | Revenue | 37,116 | 37,476 | 360 F | | | | | Variable Costs | | | | Materials | | | | Flash Memory | 4,860 | 5,249 | 389 U | Application Process | 1,935 | 1,935 | - | Chips-phone | 2,529 | 2,529 | - | Gyroscope | 468 | 468 | - | 8 Other Chips | 12,771 | 12,643 | 128 F | Variable Supplies and tools | 11,257.20 | 11,305 | 47.80 U | Assembly and Packing | 2,359.80 | 3,092 | 732.20 U | Shipping | 190.80 | 191 | .20 U | Total Variable Costs | 36,370.80 | 37,412 | 1041.20 U | Fixed Costs | | | | Factory Rent | 400 | 400 | - | Machine Depreciation | 150 | 150 | - | Utility fee and Taxes | 52 | 52 | - | Supervision | 127 | 134 | 7 | Total Fixed Costs | 729 | 736 | 7 | Total Costs | 37,099.80 | 38,148 | 1,048.20 U | Net Income | 16.20 | (672) | 688.20 U |

4.
Material Price Variance: Flash Memory
(29.16-27.00) X 180,000 =
2.16 X 180,000 = $388,800 U
Material Usage Variance: Flash Memory
(180,000 – 200,000) X 27 =
20,000 X 27 = 540,000 F

Labor Rate Variances
(15.36 – 11.8) X 180,000 =
3.56 X 180,000 = 640,800 U
Labor Efficiency Variances
(180,000 – 200,000) X 11.80 =
20,000 X 11.80 = 236,000 F

5. It seems that the factory is producing a favorable amount of iPhone 4s however it is not efficiently doing it, therefore it is overall unfavorable.

6. Wentao Chen has issues with the plants profitability as well as it’s production. In terms of what he can improve on, Chen should focus on his labor issues. Since he cannot find qualified labor to match