Note: (all numbers are in thousands of U.S. dollars and thousands of units) Question 1 Using budget data, how many Apple iPhone 4’s would have to have been completed for Danshui Plant No.2 to break even? Answer Contribution Margin = Sales – Variable Cost Contribution Margin Ratio = Contribution Margin / Sales BEP $ = Fixed Cost / Contribution Margin Ratio Price per unit = sales / units BEP units = BEP $ / units Therefore: · Contribution Margin = $41,240 - $40,411 = $829 · Contribution Margin Ratio = $829 / $41,240 = 0.02 · BEP $ = $729 / 0.02 = $36,450 · Price per unit =$41,240 / 200 units = $206.2 per unit · BEP units = $36,450 / $206.2 per unit = 176.77 units Question 2 Using budget data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocated to planned production? What was the actual cost per unit of production and shipping? Answer · Total Expected cost per unit = Expected Total Cost / Expected units → $41,140 / 200 units = $205.7 per unit · Actual cost per unit = Actual Total Cost / Actual units → $38,148 / 180 units = $211.93 per unit Question i What substantive issues were raised? Answer · Production problem: · Danshui Plant No.2 was not able to fulfill the demand for the contract. · It needs to produce 200,000 units per month of Apple iPhone 4 , but the actual produce of 180,000 units iPhone per month. · A shortage of 10% has result them to face loss about 672,000 rather than profit of 100,000. · Lack of qualified labor force: · There is difficulty in finding enough people to match their production despite raising wages by almost 30%. · Higher chances of errors as the assembly process was handled by different workers with different skills and working styles. · Cause a lot wastes in term of cost time due to the carelessness and the lack of skill of the workers. · Problem with Samsung flash memory installation: · Samsung flash memory was too damaged 1000 flash memories during installation process. · Samsung has begun to install a shield to prevent some of the damage. · Samsung raised the price of each unit by 2.00. Question ii Student analysis of the case should include the Danshui Plant 2 context and some of the problem it is facing. Answer 1- Breakeven point: Price per unit = Revenue / units = 41,240,000 / 200,000 = 206.20 $ Variable costs per unit = Variable costs / unit = 40,411,000 / 200,000 = 202.06 $ Contribution margin = price per unit – variable cost per unit = 206.20 – 202.06 = 4.14 $ Breakeven point = fixed costs / contribution margin = 729,000 / 4.14 = 176,087 units 2- Cost per unit: Total expected cost per unit Actual cost per unit Total costs 41,140,000 Total costs 38,148,000 Budget production units 200,000 Actual production units 180,000 Total expected cost per unit 41,140,000 / 200,000 = 205.70 $ Total actual cost per ...

1. Note: (all numbers are in thousands of U.S. dollars and
thousands of units)
Question 1
Using budget data, how many Apple iPhone 4’s would have to
have been completed for Danshui Plant No.2 to break even?
Answer
Contribution Margin = Sales – Variable Cost
Contribution Margin Ratio = Contribution Margin / Sales
BEP $ = Fixed Cost / Contribution Margin Ratio
Price per unit = sales / units
BEP units = BEP $ / units
Therefore:
· Contribution Margin = $41,240 - $40,411 = $829
· Contribution Margin Ratio = $829 / $41,240 = 0.02
· BEP $ = $729 / 0.02 = $36,450
· Price per unit =$41,240 / 200 units = $206.2 per unit
· BEP units = $36,450 / $206.2 per unit = 176.77 units
Question 2
Using budget data, what was the total expected cost per unit if
all manufacturing and shipping overhead (both variable and
fixed) were allocated to planned production? What was the
actual cost per unit of production and shipping?
Answer
· Total Expected cost per unit = Expected Total Cost / Expected
units
→ $41,140 / 200 units = $205.7 per unit
· Actual cost per unit = Actual Total Cost / Actual units

2. → $38,148 / 180 units = $211.93 per unit
Question i
What substantive issues were raised?
Answer
· Production problem:
· Danshui Plant No.2 was not able to fulfill the demand for the
contract.
· It needs to produce 200,000 units per month of Apple iPhone 4
, but the actual produce of 180,000 units iPhone per month.
· A shortage of 10% has result them to face loss about 672,000
rather than profit of 100,000.
· Lack of qualified labor force:
· There is difficulty in finding enough people to match their
production despite raising wages by almost 30%.
· Higher chances of errors as the assembly process was handled
by different workers with different skills and working styles.
· Cause a lot wastes in term of cost time due to the carelessness
and the lack of skill of the workers.
· Problem with Samsung flash memory installation:
· Samsung flash memory was too damaged 1000 flash memories
during installation process.
· Samsung has begun to install a shield to prevent some of the
damage.
· Samsung raised the price of each unit by 2.00.
Question ii
Student analysis of the case should include the Danshui Plant 2
context and some of the problem it is facing.
Answer
1- Breakeven point:
Price per unit = Revenue / units
= 41,240,000 / 200,000 = 206.20 $
Variable costs per unit = Variable costs / unit
= 40,411,000 / 200,000 = 202.06 $
Contribution margin = price per unit – variable cost per unit

3. = 206.20 – 202.06 = 4.14 $
Breakeven point = fixed costs / contribution margin
= 729,000 / 4.14 = 176,087 units
2- Cost per unit:
Total expected cost per unit
Actual cost per unit
Total costs
41,140,000
Total costs
38,148,000
Budget production units
200,000
Actual production units
180,000
Total expected cost per unit
41,140,000 / 200,000 = 205.70 $
Total actual cost per unit
38,148,000 / 180,000 = 211.93 $
3- Flexible budget:
4- Variance analysis:
Monthly budget
Actual
Flexible monthly budget
Flexible variance
F / U with reasons
Units
200,000
180,000
180,000

4. Revenue
41240
37476
37116
360
F
Variable costs materials:
Flash memory
5400
5249
4860
-389
U
Application process
2150
1935
1935
0
Chips-phone
2810
2529
2529
0
Gyroscope
520
468
468
0

5. 8 other chips
14190
12643
12771
128
F
Variable supplies and tools
12507
11305
11256.3
-48.7
U
Subtotal
37577
34129
33819.3
-309.7
U
labor
0
Assembly and packaging
2622
3092
2359.8
-732.2
U
Shipping
212
191
190.8
-0.2
U

6. Total variable costs
40411
37412
36369.9
-1042.1
U
Fixed costs:
Factory rent
400
400
400
0
Machine depreciation
150
150
150
0
Utility fee and taxes
52
52
52
0
Supervision
127
134
172
-7
U

7. Total fixed costs
729
736
729
-7
U
Total cost
41140
38148
37098.9
-1049.1
U
Net income
100
-672
17.1
-689.1
U
Question iii
What type of information has been provided in the Exhibit 1,2&
3.
Answer
Question iv
Budgeted and Actual Cost for each iPhone 4
Answer
Budgeted
Actual
Variable Costs:
Materials

8. 187.89
189.61
Labor
13.11
17.18
Shipping
1.06
1.06
Total Variable Costs:
202.06
207.85
Fixed Costs
3.65
4.09
Total Cost Per Unit
205.71
211.94
Total Fixed Cost = Monthly Fixed Cost / Number of Units
729.000 / 200.000 = 3.65
736.000 / 180.000 = 4.09
Question v
Calculate the budgeted selling price per unit, the gross margin
per unit, and the gross margin percentage.
Answer
Total Cost Per Unit
205.71
211.94
Selling Price
206.20
208.20
Gross Margin
0.51
3.74
Gross Margin Percent

9. 0.2
1.8
Questionvi
Why the gross margin per unit and the gross margin percentage
are low?
Answer
Question vii
Calculate budgeted or expected break-even point. Is it higher
than 180,000 units? Why losses of $672,000?
Answer