Danshui Project Essay
Charles Fiorentino, Elaine Shuyi Li, Sophie Browne, Travis Cole
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
Planned shipping cost per unit: 41,140,000/200000= $205.7
Actual shipping cost per unit: 38,148,000/ 180,000= $211.93
Number of Units
$360,000 F …show more content…
From Exhibit 2, we identify that there is an unfavorable high labor variance, which shows that the actual price we paid for labor is higher than that in the standard plan. In order to maintain or increase labor productivity while reducing costs, management should institute certain bonus/ benefit incentive policies for highly productive workers and reduce base salaries to their original rate since the 30% increase in pay did not translate into more productivity. That way, workers would have an incentive to complete assembly line tasks more quickly and with greater accuracy. This incentive program should also be accompanied by a robust training program for both new and existing employees to make sure workers are working in the most cost effective and accurate manner possible.
Danshui should also institute overtime pay which would entice workers to stay later and produce more iPhones. This, combined with more training, incentive pay and maintaining the
original base pay, might allow the plant to meet Apple’s 2.4 million iPhone contract while keeping costs under control.
Greater control of labor could also potentially increase worker productivity. If the supervisors assign