Premium Essay

Danshui Report

In: Business and Management

Submitted By honllon
Words 1032
Pages 5
Title: Danshui Plant No. 2
-------------------------------------------------
Authors: William Bruns, Julie H. Hertenstein, Kelvin Liu
INTRODUCTION
Danshui Plant No. 2 in southern China has a one-year contract with Apple Inc. to assemble 2.4 million iPhones. In the first three months of the contract, the plant is unable to assemble as many phones as expected and is operating at a loss. The plant manager must analyze the budget and prepare a summary of monthly operations to help identify the source of performance problems.

ISSUES/ PROBLEMS 1. Danshui Plant No. 2 was not able to fulfill the demand for the contract up to 3rd month. 2. Workers need to be multitasking as they need to focus on one or more task in a short period of time. 3. The assembly process which solely depends on the handwork of workers may cause human errors. 4. The assemble process for an iPhone is complicated. 5. Demand of iPhone 4 is higher than the supply in the market. 6. Revenue for August was below budget while labor cost was above budget. 7. Instead of having $100,000 profit, company had a loss of $672,000 due to unable to produce 200,000 units of iPhone 4 on time. 8. The plant face difficulty in finding enough people to match their production despite raising wages over 30% 9. Samsung flash memory was too fragile causes it can be damaged easily during installation process. 10. Current method of preparing budget may cause misinterpretation of the performance therefore flexible budget should be used to compare the actual performance.

SOLUTIONS A. Wages for workers should increase more than 30% to attract workers. Others incentive should be include attracting skilled workers to work with the company in order to increase the productivity of iPhone 4. B. Danshui can build a new plant in somewhere where the unemployment rate is high so that…...

Similar Documents

Premium Essay

Danshui Case No. 2

...Managerial Accounting Case #3 (Danshui Plant No. 2) – Instructions I would like to see all of your calculations as a part of your write-up (except for Question 3). For Q3, please attach any relevant tables as an appendix. Question 1: You’ll use the data provided in the first column of Exhibit 3 to calculate the break-even point (see chapter 3 lecture notes for details). Question 2: You’ll just compute the expected and actual total cost per unit. Question 3: Prepare a table with four columns: (1) flexible budget, (2) actual results, (3) variances, and (4) a column indicating whether a variance is favorable or unfavorable. Attach this table to the end of your write-up. Question 4: You’ll calculate the following: (1) the price and usage variance for the flash memory material cost, (2) the price and usage variance for the labor cost, and (3) the total variance for the overhead cost. Read the August Report (page 3) carefully. In this case, you don’t need the standard labor price information in order to calculate the labor price and usage variance. But, note that the standard labor price (or rate) is $0.92 per hour just in case you cannot figure out how to calculate the variances without using that information. Question 5: Think about the various cost variances (i.e., materials, labor, overhead) you calculated. Which one(s) should be the major concern for the manager? What are the causes of these variances (i.e., price variance or efficiency variance)? How can the......

Words: 313 - Pages: 2

Premium Essay

Danshui

...statements) and industry and other macroeconomic data. The aim of the analysis was to uncover mispriced securities (in order to take advantage of the mispricing), that is trade in these securities in the knowledge that the prices are not “correct”. Employing the new theories in economics and finance, Ball and Brown’s study was an attempt to determine the information content (for the securities market) of accounting numbers (in this case income measurements). Through empirical examination of stock market prices Ball and Brown (and later many others) believed they could determine the effect on stock prices of (new) accounting information. Stock prices were taken as objective, external indicators of the usefulness of the information in accounting reports. Underlying the developments in finance and financial economics, and subsequently accounting, is the notion of portfolio selection; that is, which investments should be made and included in a “portfolio of investments”? In 1959 Harry Markowitz published a book with the title Portfolio Selection: Efficient Diversification of Investments (Wiley & Sons). Starting from this work, in the mid 1960s two financial economists, Sharpe and Lintner (working at the University of Chicago), developed the CAPM which is designed to determine an appropriate return of a single asset, given a level of risk. 2 The Australasian Accounting Business & Finance Journal, February 2007 Gaffikin: Accounting Research and Theory: the age of......

Words: 10399 - Pages: 42

Premium Essay

Danshui

... MAIN ISSUE A part from reading the Danshui Plant No.2 case, we can see that there is no enough information to evaluate the performance of the pant for the first three contracts to assembly Apple iPhone 4. Analysis of the issue To get a clear picture a flexible budget was prepared for the month end of August 2010. (Shown in the table below) From the flexible that is prepared it can seen the performance of Danshui Plant NO.2 is not good enough as what it suppose to be. The budget show that Danshui has unfavorable variance in the assembly the flash memory part, variable tools and supplies, assembly and packing, shipping nad the last one on the supervision. As for the flash memory it has been stated that Samsung had raised the price by $2.00 which had been cover by the Apple as their neutralized the profit which supposedly to give a favorable variance. But for the budget it can seen that the flash memory is showing an unfavorable variance. This is due to lack of skills during the installation the labour which had lead wastage as they need to replace the damage flash memory with the new one. The replacement of the flash memory due wastage had increased the cost that is expected which had lead to unfavorable variance. Variable supplies and tools show an unfavorable variance has it has connection with installation of parts in the iPhone 4 especially on the flash memory installation part. .so when the labour done a wastage or reckless job during the installation of flash memory or......

Words: 1350 - Pages: 6

Premium Essay

Danshui

...MAIN ISSUE A part from reading the Danshui Plant No.2 case, we can see that there is no enough information to evaluate the performance of the pant for the first three contracts to assembly Apple iPhone 4. Analysis of the issue To get a clear picture a flexible budget was prepared for the month end of August 2010. (Shown in the table below) From the flexible that is prepared it can seen the performance of Danshui Plant NO.2 is not good enough as what it suppose to be. The budget show that Danshui has unfavorable variance in the assembly the flash memory part, variable tools and supplies, assembly and packing, shipping nad the last one on the supervision. As for the flash memory it has been stated that Samsung had raised the price by $2.00 which had been cover by the Apple as their neutralized the profit which supposedly to give a favorable variance. But for the budget it can seen that the flash memory is showing an unfavorable variance. This is due to lack of skills during the installation the labour which had lead wastage as they need to replace the damage flash memory with the new one. The replacement of the flash memory due wastage had increased the cost that is expected which had lead to unfavorable variance. Variable supplies and tools show an unfavorable variance has it has connection with installation of parts in the iPhone 4 especially on the flash memory installation part. .so when the labour done a wastage or reckless job during the installation of flash......

Words: 1349 - Pages: 6

Premium Essay

Case 1 Danshui Plant

.............................. 9 CONCLUSION ..................................................................................................................................... 10 0 INTRODUCTION To compete with other electronic company, Apple plan to produce a new model with new function which is iPhone 4 to expand their market. Thus, Apple have 12-month contract with Danshui Plant No.2 Company to assemble the 2.4 million iPhone 4 in the period between June 1, 2010, and May 31, 2011. Danshui was a contract manufacturer located at southern China which assembled electronic products for those companies wishing to save labor costs. Danshui was chosen to be the contract company because the semiskilled labor was cheap and was available for less than one dollar an hour. The cost for the labor is cheaper if compare with another country. The target for the contract is to assembly 2.4 million iPhones within 1 year, which means that the company should produce 200,000 units’ iPhones per month. Until now, Danshui only produce 180,000 units per month for the first three month. The condition shows that Danshui Company cannot achieve the target and did not meet the requirement from apple as stated in the contract. At this moment, the manager of the company, Wentao Chen was request a summary of monthly operations for August as soon as possible after the end of month from the plant controller, Jianye Ma. Based on the investigation and evaluation, the main reason that the company cannot...

Words: 2543 - Pages: 11

Premium Essay

Danshui Case Study

...REFERENCES 12 INTRODUCTION AND MAIN ISSUES Danshui was a contract manufacturer that assembled electronic products for companies wishing to save labour costs by locating in southern China. Because of high demand for iPhone 4, Apple had contracted with Danshui to assemble iPhone in Plant No. 2. The contract need Danshui to assemble 2.4 million iPhone in the period between June 1, 2010 and May 31, 2011. Wentao Chen, manager of Danshui Plant No. 2 was worried because in the third month of the contract production was only 180,000 units per month. Suppose to produce 2.4 million iPhone its need 200,000 units per month. After preliminary budget has come out, the company loss of $672,000. The main issue of this case is the break contract between Danshui and Apple. The contract called Danshui to assemble 2.4 million in the period of one year, but Danshui only can produce 180,000 units per months. If Danshui still can produce that amount, it can’t reach 2.4 million in one year. This might happen because Danshui cannot find people to hire, even though they have raised wages by almost 30%. Another reason is they have problem with the Samsung flash memory installation. One thousand flash memories were damaged in August. Samsung is aware of this problem and has begun to install a shield to prevent the damage. However, it is just for prevention in the short time. Due to the contract has not been fulfilled, Danshui may be needed to pay back a lot of money for the......

Words: 2251 - Pages: 10

Premium Essay

Danshui

...material $7.25/unit Wages and salaries $20,000 Utilities $0.45/unit $1,200 Rent $10,000 Miscellaneous $0.90/unit $2,000 Required: a) Prepare the company’s planning budget assuming that 10,000 units were manufactured. b) Assume that 9,900 units were actually manufactured. Prepare the flexible budget for this level of activity. c) Prepare a flexible budget performance report for the company using the actual income statement information shown below. Revenue Costs of materials Salaries Utilities Rent Miscellaneous Solution #2: a) Planning Budget and b) Flexible Budget Revenue and Cost Formula $15.00/unit $7.25/unit $20,000 $.45/unit+$1,200 $10,000 $.90/unit+$2,000 Planning Budget Income Statement 10,000 $150,000 72,500 20,000 5,700 10,000 11,000 $119,200 $30,800 $149,200 73,200 19,500 5,800 10,000 12,000 Flexible Budget Income Statement 9,900 $148,500 71,775 20,000 5,655 10,000 10,910 $118,340 $30,160 Budgeted number of units sold Revenue Expenses: Cost of materials Salaries Utilities Rent Miscellaneous Total expenses Net Operating Income Page 5 of 26 Revised Fall 2012 b) Flexible budget Performance Report (1) Planning Budget Number of Units Revenues Expenses: Cost of materials Salaries Utilities Rent Miscellaneous Total Expense Net Operating Income (2) Flexible Budget Revenue and Spending Variances (3) - (2) (3) Actual Results 10,000 9,900 $15.00/unit $150,000 $148,500 $7.25/unit $20,000 $.45/unit+ $1,200 $10,000 $.90/unit+ $2,000 72,500 20,000 5,700 10,000......

Words: 5539 - Pages: 23

Premium Essay

Danshui Plant No. 2

...Overview: Apple Corporation released iPhone 4 on June 24, 2010 and sold more than 1.7 million units in the first three days. To prepare for the launch of the new product, Apple contracted with the Danshui Plant No. 2 to assemble the new iPhones. Danshui Plant No.2, a contract manufacturer in southern China that assembles electronic products for companies wishing to save on labor costs, received a one-year contract starting on June 1, 2010 with the Apple Corporation to assemble 2.4 million iPhone 4s. In the first three months of the contract it became obvious that the plant was unable to assemble the expected 200,000 iPhones per month and was operating at a loss. Although the plant is known for hiring semi-skilled workers, the new iPhone contract required a complex assembly process entirely based on handwork by 325 workers, with 140 steps involving 100 components during 5 days. To anticipate the need for qualified workers, Danshui had raised their factory wages by almost 30%. But even with the wage increase, Danshui was not able to hire enough qualified workers to assemble the complex new product. Another issue was that, based on original modeling, Danshui was actually operating at a loss and was unable to fill the expected 200,000 per month iPhone quota in the first three months. To begin analyzing the root causes for the shortfall, the controller had considered preparing a “flexible budget” to provide a more realistic comparison of the performance to the budget. If the...

Words: 2032 - Pages: 9

Premium Essay

Danshui Case

...Apple Corporation released iPhone 4 on June 24, 2010 and sold more than 1.7 million units in the first three days. To prepare for the launch of the new product, Apple contracted with the Danshui Plant No. 2 to assemble the new iPhones. Danshui Plant No.2, a contract manufacturer in southern China that assembles electronic products for companies wishing to save on labor costs, received a one-year contract starting on June 1, 2010 with the Apple Corporation to assemble 2.4 million iPhone 4s. In the first three months of the contract it became obvious that the plant was unable to assemble the expected 200,000 iPhones per month and was operating at a loss. Although the plant is known for hiring semi-skilled workers, the new iPhone contract required a complex assembly process entirely based on handwork by 325 workers, with 140 steps involving 100 components during 5 days. To anticipate the need for qualified workers, Danshui had raised their factory wages by almost 30%. But even with the wage increase, Danshui was not able to hire enough qualified workers to assemble the complex new product. Another issue was that, based on original modeling, Danshui was actually operating at a loss and was unable to fill the expected 200,000 per month iPhone quota in the first three months. To begin analyzing the root causes for the shortfall, the controller had considered preparing a “flexible budget” to provide a more realistic comparison of the performance to the budget. If the plant...

Words: 344 - Pages: 2

Premium Essay

Analysis of Danshui Plant No.2

...Introduction Danshui was a contract manufacturer that assembled electronic products located in Southern China. Danshui has a contract to assemble 2.4 million iPhones within the period from 1st June 2010 to 31st May 2011 and their current production is only 180,000 units per month compared to planned production is 200,000 units. Danshui is using semiskilled labor for less than 1 dollar an hour and assembly line technique. Due to high demand of IPhone 4, Apple had contracted with Danshui to assemble iphones in Plant No. 2. A budget had been prepared soon after iPhone contract was signed. Therefore, Danshui plant manager, Wentao Chen was responsible to control all costs including materials, labor, overhead and shipping. IPhone 4 contained more than 100 components including flash memories, application processor, chip for phone calls, gyroscope and etc. Therefore, each worker will need to focus more than one task in a short period of time due to its assembly line toward completion. The assembly process entirely based on handwork by workers, where there are 140 steps in assembly process to be done by 325 individuals during 5 working days. The August Report had shown a loss of $672,000 although budget is $100,000, this is due to unable to produce 200,000 iPhone 4 units on demand. The major obstacle is not hiring enough qualified labor although wages was raised by 30% since July. Besides, flash memory installation also causing a trouble where they can be damaged by heat if......

Words: 3021 - Pages: 13

Premium Essay

Danshui

...Introduction Danshui Plant No.2 is a contract manufacturer locating in southern China and was assembles electronic products for companies wishing to save labor costs and they are using semiskilled labor for less than 1 dollar an hour. In August 2010, Danshui Plant No.2 in southern China has a 1 year contract in the period between 1 June 2010 and 31 May 2011 with Apple incorporation to assemble the Apple iPhone 4. Based on the contract, Danshui need to assemble 2.4 million iPhones within 1 year. However, Wentao Chen, manager of Danshui Plant No.2 was anxious about the plant is not able to assemble 2.4 million as their expected and is operating at a loss when the third month of the contract. Their current production was only 180,000 units per months compared to their planned monthly budget is 200,000 units. Therefore, manager was called the plant controller to analyze the budget and request a summary of monthly operations for August as soon after the end of the month as possible in order to identify the source of performance problem. Problem statement In the contract between Apple and Danshui Plant No.2, Danshui need to assemble 2.4 million iPhone within 1 year. This means that Danshui need to produce 200,000 units iPhone 4 per month but now in the third month of the contract they only produce 180,000 per month. Therefore, there are unable to assemble the iPhone 4 within 1 year this may because of they are lack of qualified labor. Danshui Plant No.2 are employs those......

Words: 1750 - Pages: 7

Premium Essay

Danshui

...Danshui Plant No.2 is a contract manufacturer locating in southern China and was assembles electronic products for companies wishing to save labor costs and they are using semiskilled labor for less than 1 dollar an hour. In August 2010, Danshui Plant No.2 in southern China has a 1 year contract in the period between 1 June 2010 and 31 May 2011 with Apple incorporation to assemble the Apple iPhone 4. Based on the contract, Danshui need to assemble 2.4 million iPhones within 1 year. However, Wentao Chen, manager of Danshui Plant No.2 was anxious about the plant is not able to assemble 2.4 million as their expected and is operating at a loss when the third month of the contract. Their current production was only 180,000 units per months compared to their planned monthly budget is 200,000 units. Therefore, manager was called the plant controller to analyze the budget and request a summary of monthly operations for August as soon after the end of the month as possible in order to identify the source of performance problem. Problem statement In the contract between Apple and Danshui Plant No.2, Danshui need to assemble 2.4 million iPhone within 1 year. This means that Danshui need to produce 200,000 units iPhone 4 per month but now in the third month of the contract they only produce 180,000 per month. Therefore, there are unable to assemble the iPhone 4 within 1 year this may because of they are lack of qualified labor. Danshui Plant No.2 are employs those semiskilled labor......

Words: 428 - Pages: 2

Premium Essay

Danshui Project

...Danshui Plant No.2 Charles Fiorentino, Elaine Shuyi Li, Sophie Browne, Travis Cole Problem 1. Breakeven Volume: Price/Unit = Sales/# units = 41,240,000/200,000 = 206.2 Variable Costs/Unit = 40,411,000/200,000 = 202.055 Contribution Margin/Unit = 206.2 - 202.055 = 4.145 Break-even = Fixed Costs/ (CM/unit) = 729,000/4.145 = 175,875 units Problem 2. Planned shipping cost per unit: 41,140,000/200000= $205.7 Actual shipping cost per unit: 38,148,000/ 180,000= $211.93 Problem 3: Exhibit 1 Static Budget Actual 200,000 Number of Units Flexible Budget 180,000 180,000 $41,240,00 0 $37,116,000 $37,476,0 00 Variance Per Unit Sales Revenue $206.2 37,577,000 33,820,200 $360,000 F Variable Manuf. Costs 187.89 308,800 U Labor 13.11 2,622,000 2,359,800 3,092,000 732,200 U Variable G, S & A 1.06 212,000 190,800 191,000 200 U Contribution Margin 829,000 745,200 64,000 681,200 U Fixed Costs 729,000 729,000 736,000 7,000 U Net Income 100,000 16,200 -672,000 688,200 U 34,129,00 0 Problem 4. Exhibit 2 Standard Actual Price Variance Flash Memories Price $27.00 $29.16 $388,800 U Flash Memories Usage 200,000 180,000 540,000 F Labor Rate $13.11 $17.18 $732,600 U Labor......

Words: 682 - Pages: 3

Premium Essay

Danshui

...DANSHUI PLANT NO. 2 CONTENTS | PAGE | 1.0 Introduction | | 2.0 Main issue | | 3.0 Problem statement | | 4.0 Data Analysis 4.1 Breakeven analysis 4.2 Total cost variance analysis 4.3 Flexible budget performance analysis 4.4 Variance analysis | | 5.0 Strategies, interpretations, recommendations and justifications | | 6.0 Conclusion | | 7.0 References | | 1.0 INTRODUCTION Danshui Plant No. 2 in southern China has a one-year contract with Apple Inc. to assemble 2.4 million iPhones. In the first three months of the contract, the plant is unable to assemble as many phones as expected and is operating at a loss. The plant manager must analyze the budget and prepare a summary of monthly operations to help identify the source of performance problems. The plant has had difficulty hiring enough workers despite raising wages over 30%. 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. Wentao Chen, manager of Danshui was anxious upon reviewing the monthly operation’s performance for August as in the third month of the contract, production was only about 180,000 units. Meanwhile, Jianye Ma, the plant controller requested a summary of monthly operations for August as soon after the end of the month as possible. 2.0 MAIN ISSUE Danshui Plant manager......

Words: 2997 - Pages: 12

Free Essay

Danshui

...Danshui Plant No.2 The following case focuses on Danshui, a contract manufacturer that assembled electronic products. Danshui is currently in the third of a 12 months’ contract to assemble 2.4 million units of Apple’s iPhone 4. Monthly production target for Danshui is 200,000 units but three months’ study reflects that Danshui may not meet this target in 12 months and would also overrun the cost barrier thus landing in an unprofitable situation. Plant controller, Jianye Ma presented her analysis for August production to the plant manager, Wentao Chen. According to this report, the main difficult the plant is facing is being able to hire enough people to get the production to the 200000 units per month budgeted, despite having increased wages by a 30%. Questions 1. A. Total expected Cost – 41,140,000$ for 200,000 units ------------------------------------------------- Cost per unit – 205.70$ B. Actual Cost – 3,8148,000$ for 180,000 units ------------------------------------------------- Cost per unit – 211.91$ 2. The flexible budget variances can be seen in Appendix1. According to the results, there is an overall unfavourable variance of 1048.2$. this means, that even if production has been 180,000 instead of 200,000, there is still a variance NOT EXPLAINED by the reduction in volume. The colours in appendix one represent whether the impact of the variance is positive (green) or negative (red). It can be seen, that assembly and packaging represents the......

Words: 689 - Pages: 3

Télécharger Continuer Film Complet Torrent Francais | DPReview DigitalPhotography | Depeche Mode