Danshui Plant No. 2 Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Question 3

Prepare a flexible budget for 180,000 iPhone 4’s and calculate flexible budget variances using actual costs for August.
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Answer 3

Flexible budget is made for the comparison of actual data with the budgeted data. The Flexible budget represents the standard unit through budgeted estimation with the actual number of outputs. This budget is organized by multiplying the standard per unit cost with the actual units of output. This calculation is presented in the excel sheet and are annexed in the Appendix C. In this excel sheet, it represents two outputs, one is for budgeted and two are using actual in which one is for flexible budget and second is for actual budget. This budget is performed through the variance analysis with flex and actual. The unfavorable variance represents management inconsistency and inefficiency, but some of the variance which is related to the price, they are effected from the economic circumstances of the country. Favorable variance represents the affirmative results of the management. The variance result in total is $19.47 which shown in term of favorable variance.

Question 4

Estimate material price and usage for flash memories, labor rate and usage (efficiency) variances, and the overhead spending variance for August.

Answer 4

Basically, variance analysis means the difference of the standard and actual outcomes with the consistency and efficiency of the product or company levels. Variances can be positive or negative, the negative may arise due to inadequacy of the management or it may come from a certain variation in the economy prices of the material and labor. Rate/Price variance, usage variance and overhead spending calculation are shown in the excel sheet with the name Analysis of Variance and also depicted in the Appendix B. Variances shows lack of labor efficiency by use of Samsung flash chip in the iPhone 4 and they are losing approximately 1000 chips per month. Although hiring is complete with skill full labor. Further material changes come due to price changes. Overhead variance occurs due to the inefficiency of the production department.

Question 5

What are some strategies or decisions that Wentao Chen should consider in trying to solve the problems with the Apple iPhone 4 contract in the next nine months? How would this change the costs and profitability of Company No. 2 and the iPhone 4 contract?

Answer 5

Alternative Decision and their Impact on Profitability

Apple and the Danshui Plant should shelter these issues to overcome the inefficiency with respect to the profitability of the both the companies, as the Company burning about one thousand chips per month during its connection.

Both Companies should contract, memorandum of understanding “MOU” with the Samsung Company for the evidences of the ineffectiveness of labor and they would be trained in the unskilled labor under the supervision of the Samsung Management for the use of flash memory chip which are used in the iPhone 4 mobiles. By doing these techniques would reduce the $2 per unit cost. Further, it would reduce the minimum level of flash memory chip. The problem of shortage of unskilled labor should be cover-up through global recruitment of the labor in order to meet the budgeted demand.

Although it is costly, but it entails onetime cost which can be amortized over the training period of the labors. The skilled labor will fulfill the demand of iPhone 4 which would come in the future as it is estimated in the market of “iPhone 4”. The organization should recruit labor globally and the second alternative is that they should install a new plant in their region where they are facing the problem.............................................

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