Danshui Project Essay

684 Words Oct 8th, 2015 3 Pages
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
The primary factor that caused an underproduction of iPhones at Danshui and thus an underwhelming net income is a lack of qualified labor, which is directly caused by insufficient employee training processes and inefficient management operations.
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

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