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    Danshui Plant 2 - 2019

    Uploaded by

    louie florentine Sanchez
    The document describes a case analysis of Danshui Plant No. 2, which has a contract to assemble 2.4 million Apple iPhone 4 units over 12 months. In the third month, the plant only produced 180,000 units instead of the targeted 200,000. This caused a loss of $672,000 for the month. The manager Wentao Chen is concerned about falling behind production targets and costs exceeding budgets. The document outlines several case problems to analyze, including calculating the break-even point and flexible budgets, as well as strategies for Chen to consider to solve the problems and improve profitability for the remainder of the contract.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Danshui Plant 2 - 2019

    Uploaded by

    louie florentine Sanchez
    491 views19 pages
    The document describes a case analysis of Danshui Plant No. 2, which has a contract to assemble 2.4 million Apple iPhone 4 units over 12 months. In the third month, the plant only produced 180,000 units instead of the targeted 200,000. This caused a loss of $672,000 for the month. The manager Wentao Chen is concerned about falling behind production targets and costs exceeding budgets. The document outlines several case problems to analyze, including calculating the break-even point and flexible budgets, as well as strategies for Chen to consider to solve the problems and improve profitability for the remainder of the contract.

    Original Description:

    Danshui Plant 2 Case study for management accounting

    Original Title

    DANSHUI PLANT 2_2019

    Copyright

    © © All Rights Reserved

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    The document describes a case analysis of Danshui Plant No. 2, which has a contract to assemble 2.4 million Apple iPhone 4 units over 12 months. In the third month, the plant only produced 180,000 units instead of the targeted 200,000. This caused a loss of $672,000 for the month. The manager Wentao Chen is concerned about falling behind production targets and costs exceeding budgets. The document outlines several case problems to analyze, including calculating the break-even point and flexible budgets, as well as strategies for Chen to consider to solve the problems and improve profitability for the remainder of the contract.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    491 views19 pages

    Danshui Plant 2 - 2019

    Uploaded by

    louie florentine Sanchez
    The document describes a case analysis of Danshui Plant No. 2, which has a contract to assemble 2.4 million Apple iPhone 4 units over 12 months. In the third month, the plant only produced 180,000 units instead of the targeted 200,000. This caused a loss of $672,000 for the month. The manager Wentao Chen is concerned about falling behind production targets and costs exceeding budgets. The document outlines several case problems to analyze, including calculating the break-even point and flexible budgets, as well as strategies for Chen to consider to solve the problems and improve profitability for the remainder of the contract.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 19

    Danshui Plant No.

    2
    A CASE ANALYSIS
    1.
    Background
    of the Case
    Background of the Case
    ▪ Danshui is a contract manufacturer that assembles
    electronic products for companies wanting to save
    on labor costs
    ▪ Has a 12-month contract with Apple to assemble 2.4
    million units of Apple iPhone 4
    ▪ Prior to the Apple contract, Danshui Plant No. 2 has
    been assembling computer hard drives
    ▪ Management is confident that the workers can easily
    adapt to a new and different assembly scheme
    3
    Background of the Case (continued)
    ▪ However, in August 2010, third month of the
    contract, monthly production has only been 180,000
    units (instead of 200,000 units/month)

    ▪ underproduction alarmed Wentao Chen, manager of


    the plant

    ▪ August revenue is below target, material usage


    seems good and labor costs were above budget
    4
    Background of the Case (continued)
    ▪ Plant profit had a loss of $672,000

    ▪ Company is also facing problems in hiring enough


    people to meet quantity requirements despite 30%
    increase in wages

    ▪ In addition, there is material wastage due to


    inefficiency in installing Samsung flash memory
    resulting to an additional cost of $2/unit
    5
    6
    7
    8
    2.
    Case Problems
    Case Problems
    2. Using budget data, what
    was the total expected
    cost per unit if all
    1. Using budget data, how
    manufacturing and
    many Apple iPhone 4’s
    shipping overhead (both
    would have to have been
    variable and fixed) were
    completed for Danshui
    allocated to planned
    Plant No. 2 to break-even?
    production? What was the
    actual cost per unit of
    production and shipping?
    10
    Case Problems (continued)
    3. Prepare a flexible 4. Estimate material 5. What are some
    budget for 180,000 price and usage for flash strategies or decisions
    iPhone’s and calculate memories, labor rate that Wentao Chen
    flexible budget and usage (efficiency) should consider in trying
    variances using actual variances and the to solve the problems
    costs for August. overhead spending with Apple iPhone 4
    variance for August. contract in the next nine
    months? How would
    these change the cost
    and profitability of
    Danshui Plant No. 2 and
    the iPhone 4 contract?

    11
    Assumptions,
    3.
    Scope
    and Limitations
    ▪ No new machine will
    ▪ Fixed costs are within
    be added into the
    relevant range and will
    assembly line.
    remain constant.

    ▪ No significant
    ▪ No significant
    fluctuation on
    fluctuation on CNY-
    exchange rate of CNY
    USD exchange rate (?)
    and USD (?)

    1. Contract between
    1. Contract between
    Danshui and Apple
    Danshui and Apple
    cannot be rescinded.
    cannot be rescinded.
    13
    4.
    Analysis/Solutions
    also known as cost-volume profit
    Break-even analysis, is the study of the
    relationship between selling prices,
    Analysis sales volumes, fixed costs, variable
    costs and profits at various levels of
    activity.

    15
    1. Using budget data, how many Apple
    iPhone 4’s would have to have been
    completed for Danshui Plant No. 2 to
    break-even?

    16
    Break-even Point

    17
    Break-even Point

    18
    176,087
    iPhone 4 units have to be produced to breakeven.

    19

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