Case #3 Danshui Plant No.2

797 Words Jan 9th, 2014 4 Pages
Case #3
Danshui Plant No.2

Answers 1. The break-even point for Danshui plant no 2 is 175874.54 units. The calculation of this number is simply from the break-even formula, fixed costs divided by contribution margin per unit. Fixed costs for the plant were 729 000 and the contribution margin is revenue minus variable costs which equals to 829 000 and the CM per unit is 829 000 / 180 000 which is 4,145. The break-even is therefore 175874.54 units. 2. The actual and expected cost per unit was 211,919 and 205,705 respectively. These numbers can be computed simply by dividing the total cost given in preliminary report-Exhibit 3 of the case- by the number of units. For actual cost per units it would be actual total costs
…show more content…
The equation therefore, becomes (2585,28-2565)*0.92 which equals to 18,66. The total variance for the overhead is 7 000 which can be found again in the preliminary report given in the case. 5. Among the variances calculated the ones that the company should be more concerned about is the labor variance. Although the material variance is overall more unfavorable, the prices of he materials are something company cannot control. They can control not damaging the materials, but in this case Samsung already increased the quality of the flash memories so that shouldn’t be a problem for the company. The labor on the other hand is a big concern for the company. The labor cost is higher than they anticipated, causing an unfavorable labor variance and although they are efficient with the labor quantity, they haven’t even produced enough iPhone 4’s . They need more labor, as they need to produce more iPhone 4’s. It is stated that they cannot find new workers therefore I would advise them to consider opening a new plant. Although this will increase the fixed costs, it will prevent the fulfillment of the contract. Exhibit 1
| | | |…

More about Case #3 Danshui Plant No.2