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danshui

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Introduction
Danshui Plant No.2 is a contract manufacturer locating in southern China and was assembles electronic products for companies wishing to save labor costs and they are using semiskilled labor for less than 1 dollar an hour. In August 2010, Danshui Plant No.2 in southern China has a 1 year contract in the period between 1 June 2010 and 31 May 2011 with Apple incorporation to assemble the Apple iPhone 4. Based on the contract, Danshui need to assemble 2.4 million iPhones within 1 year. However, Wentao Chen, manager of Danshui Plant No.2 was anxious about the plant is not able to assemble 2.4 million as their expected and is operating at a loss when the third month of the contract. Their current production was only 180,000 units …show more content…

Question 3
Prepare a flexible budget for 180,000 iPhone 4’s and calculate flexible budget variances using actual costs for August.
Question 4
Estimate material price and usage for flash memories, labor rate and usage (efficiency) variances, and the overhead spending variance for August.
i. Direct Material Price Variance (Flash Memory)
= (Actual Price – Standard Price) Actual Quantity Purchased
= ( – $ 27.00) 180,000 units
= ($ 29.16 – $ 27.00) 180,000 units
= $ 388,800 U

ii. Direct Material Usage Variance (Flash Memory)
= (Actual Quantity – Standard Quantity) Standard Price
= (180,000 units – 200,000 units) $ 27.00
= $ 540,000 F

Therefore, the total material variance is $ 151,200 Favorable. iii. Direct Labor Rate Variance (Flash Memory)
= (Actual Rate– Standard Rate) Actual Hours (production)
= ( – $ 13.11) 180,000 units
= ($ 17.18 – $ 13.11) 180,000 units
= $ 732,600 U

iv. Direct Labor Usage (Efficiency) Variance
= [Actual Hour (production) – Standard Hour (production)] Standard Rate
= (180,000 units –

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