MA CASE

DANSHUI
PLANT NO. 2
GROUP 6

Team Members :
ANMOL THUSOO M120-21 RISHABHJEET SINGH CHHABDA M178-21
DEVIKA ER M136-21 SHIVANI SUMAN M188-21
GURLEEN KAUR M144-21 SHRUTI SARIN M191-21
ISHAN UPRETI M149-21 SHUBHAM TOSHNIWAL M193-21
REVANTH PABBATHI M177-21 VAIBHAV GERA M211-21
Introduction
• Danshui is a contract manufacturer specialising in assembling electronics
products.
• They are located in the Southern part of China.
• The company has a contract with the "Apple Company" to assemble iPhone 4
parts. The agreement is based on the production of 2.4 million Apple iPhones
within 12 month period.
• Wentao Chen, who was the manager of Danshui, was anxious upon reviewing
the monthly operations performance of August as in the third month of
agreement output was only 1,80,000 units.
Challenges Faced

PRODUCTION UNIT LACK OF QUALIFIED Damaged fl ash

LABOUR Memory
The budgeted production units for Employees of the company were not During the assembling process,
Danshui Plant was 200000 units per qualified enough. Also, they could flash components were damaged,
and 1000 units of this component
month, but the actual production units not find new qualified labour for the
were replaced during the
were 180000 units per month. plant. inspection phase.
176087 units of Apple iPhone
4 needs to be completed for
Danshui Plant No 4 to break
even.
The total expected cost per
unit if all manufacturing and
shipping overhead (both
variable and fixed) were
allocated to planned
production
$205.70

The actual cost per unit of

production and shipping

$211.93
Flexible budget for 180,000 iPhone 4’s and flexible budget variances using
actual costs for August.
The Material Price Variance is $389,000 Unfavourable, since the actual price is greater than the budgeted price.
Similar is the reasoning for Labor Rate Variance which is $732,200 Unfavourable.

The Material Quantity Variance is $540,000 Favourable, since the actual quantity used is lesser than the budgeted
quantity. Similar is the case for Labor Efficiency Variance which is $262,200 Favourable.

The Fixed OH Spending Variance is $7,000 Unfavourable owing to the fact that actual expenditure was greater
than the standard provided.
 Recommended Strategies

WAGE POLICY OUTSOURCING NEW PLANT TRAINING CELLULAR

Implementing overtime This option will only be Construct a new plant Carrying out training MANUFACTURING
schedule plan and pay carried out if the cost in a low-cost location and development
This will lead to effective
for performance policy. of outsourcing is less with higher activities to increase
allocation of the
It is the most effective than the cost of unemployment, hence the productivity of the
resources.
way to boost assembling in-house. lowering its labour employees.
production while expenses.
maintaining the same
capacity.
 Evaluation of the recommended strategies

Providing training to the current workers would help avoid the 30% increase in the
labour rate which would have been paid to the new workers. This would reduce the
costs and hence, increase the profitability. The assumption here is that training per
worker costs less than the 30% hike.
Thank you