The purpose of this case assignment is to prepare flexible budget and calculate variances.

Complete the following:

1. 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 (using 200,000 units) production? What was the actual (using 180,000 units) cost per unit of production and shipping?
2. Prepare flexible budget for 180,000 iPhone 4s, and calculate flexible budget variances using actual costs for August.
3. For the month of August, calculate the following variances (assuming the standard labor rate is $0.92 per hour):
4. Material price variance for flash memories
5. Material usage variance for flash memories
6. Labor rate variance
7. Labor usage (efficiency) variance
8. Overhead spending variance
9. What are some strategies or decisions that Wentao Chen should consider when trying to solve the problems with the Apple iPhone 4 contract in the next 9 months? How would these change the costs and profitability of Danshui Plant No. 2 and the iPhone 4 contract? Approach this from both Danshui's and Apple's point of view.

Exhibit 1 Standard Variable Costs for iphone 4 (U.S. Dollars Bill of materials (per unit) Purchased chips: Flash memory (Samsung) $27.00 Application processor (Samsung) 10.75 Chip for phone calls (Infinion) 14.05 Gryoscope (STMicroelectronics) 2.60 8 other purchased chips 70.95 $125.35 Variable supplies and tools 62.54 187.89 Labor: Assembly and packaging (per unit) 13.11 Shipping (per unit) 1.06Factory rent $400,000 Machine depreciation 150,000 Utility fee and local taxes 52,000 Supervision 127,000 Monthly fixed costs $729,000Monthly Budget Actual Variance (200,000 units) (180,000 units) (20,000 units) Revenue (transfer from Shenzhen) $41,240 $37,476 $3,764 U Variable costs Materials Flash memory 5,400 5,249 151 F Application process 2,150 1,935 215 F Chipsphone 2,810 2,529 281 F Gyroscope 520 468 52 F 8 other chips 14,190 12,643 1,547 F Variable supplies and tools Q,LW , LM Subtotal 37,577 34,129 3,448F Labor Assembly and packaging 2,622 3,092 470 U Shipping m m E Total variable costs 40,411 37,412 2,999 F Fixed Costs: Factory rent 400 400 - Machine depreciation 150 150 - Utility fee and taxes 52 52 - Supervision m 134 E Total fixed costs 729 736 7 U Total costs ,140 3_8,148 2,992 F Net income $ 100 $ (672) $ 772 U