Case Questions Danshui Plant
Table of Contents
1) Explain briefly contribution margin. How is it calculated? 2
2) Using Budget Data, estimate the breakeven sales for Apple iPhone 4 3
3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping? 3
4) State the differences between a static budget and a flexible budget. Prepare Flexible budget for 160,000 iPhone 4’s 4
5) Prepare Flexible budget for 180,000 iPhone 4’s and calculate flexible budget variances using actual costs for August. 5
6) Give your suggestions on 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 theses change the cost and profitability of Danshui Plant No. 2 iPhone 4 contract? 6
Works Cited 7
1) Explain briefly contribution margin. How is it calculated?
Contribution margin is defined as how much of a company 's revenues will be contributing (after covering the variable expenses) to the company 's fixed expenses and net income. The contribution margin can be presented as
1) The total amount for the company
2) The amount for each product line
3) The amount for a single unit of product
4) As a ratio or percentage of net sales
Total Variable Costs
Material Cost + Labor Cost + Shipping Cost
187.89+13.11+1.06
= 202.06 Per Unit
Total Fixed Costs
Factory rent + Machine Depreciation +Utility fees and taxes+ Supervision
400000+150000+52000+127000
=729,000 Per Month
Contribution Margin
Price Per Unit – Variable Cost Per Unit
Price = 41,240,000 / 200,000 = 206.2
= 206.2-202.6 = 4.14 Per Unit
2) Using Budget Data, estimate the breakeven sales for Apple iPhone 4
Break Event Point
Fixed Cost / Contribution Marginal
729,000/4.14
=176,086.95 unit
3) Using the budget Data, what was the total expected cost per unit if all
1) Explain briefly contribution margin. How is it calculated? 2
2) Using Budget Data, estimate the breakeven sales for Apple iPhone 4 3
3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping? 3
4) State the differences between a static budget and a flexible budget. Prepare Flexible budget for 160,000 iPhone 4’s 4
5) Prepare Flexible budget for 180,000 iPhone 4’s and calculate flexible budget variances using actual costs for August. 5
6) Give your suggestions on 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 theses change the cost and profitability of Danshui Plant No. 2 iPhone 4 contract? 6
Works Cited 7
1) Explain briefly contribution margin. How is it calculated?
Contribution margin is defined as how much of a company 's revenues will be contributing (after covering the variable expenses) to the company 's fixed expenses and net income. The contribution margin can be presented as
1) The total amount for the company
2) The amount for each product line
3) The amount for a single unit of product
4) As a ratio or percentage of net sales
Total Variable Costs
Material Cost + Labor Cost + Shipping Cost
187.89+13.11+1.06
= 202.06 Per Unit
Total Fixed Costs
Factory rent + Machine Depreciation +Utility fees and taxes+ Supervision
400000+150000+52000+127000
=729,000 Per Month
Contribution Margin
Price Per Unit – Variable Cost Per Unit
Price = 41,240,000 / 200,000 = 206.2
= 206.2-202.6 = 4.14 Per Unit
2) Using Budget Data, estimate the breakeven sales for Apple iPhone 4
Break Event Point
Fixed Cost / Contribution Marginal
729,000/4.14
=176,086.95 unit
3) Using the budget Data, what was the total expected cost per unit if all
Cited: Accounting Coach. 20 April 2013. <http://www.accountingcoach.com/blog/what-is-contribution-margin>. Media, Demand. Static vs. Flexible Budgets for New Businesses. 9 Feb 2005. <http://smallbusiness.chron.com/static-vs-flexible-budgets-new-businesses-20879.html>.