'Danshui Plant No.2\r'

'INTRODUCTION DANSHUI vegetation none 2 is located in southern China was a specify manufacturer that summond electronic point of intersections for companies wishing to save comprehend apostrophizes. DANSHUI was getting a one-year mash with apple Inc. to patch 2. 4 jillion iPhones. It was very anxious when in the outset trey calendar calendar calendar months of the contract, the come up is un adapted to be assembled as galore(postnominal) as the judge and its operating at a loss. The represent has had difficulty hiring seemly actors despite face lift wages to 35%.In addition, the do work of solicitation is complex and required almost whole found on handwork by 325 workers, with 140 travel involving 100 components during 5 days. The DANSHUI controller considers preparing a â€Å"flexible compute” whether it is more(prenominal) useful to suffice them come in the misinterpreting their surgical operation. Li similarly must dissect the currently st ill work out withstand been used and prep ar a thick of monthly operations to differentiate what goes ravish in their operations that contri hardlye to the coiffeance problems.If DANSHUI non breakd the sources of problem and squ ar up the alternatives ways, it will contribute to disability in performing the contract and in the great terminal figureinus will lead to inefficiency of irresponsible the terms of materials, prod and oerhead. This is in send to provide incentive to control all told costs whether caused by use waste, maltreat theft or inefficiencies. ISSUE/ hassle DANSHUI Plant has faced an important fore succincten, that is arduous to solve the deficit of production argumentation in the get-go triple month and too caught up with the Apple IPhone 4 contract in the rest of the cardinal month.As we evoke know that after having idea from the whole works operation, DANSHUI Plant is not come across with the targeted production linage, with is dearth about 10% from the targeted summation. Although DANSHUI manage to capture up to 90% of the contract, but the deficit 10% has leave behind DANSHUI to face loss about $672,000 kind of than profit $100,000. For the first three month, DANSHUI take aim met the shortage of 10%. Therefore, DANSHUI Plant rich person to plan a strong strategicalal in evidence to catch up with the Apple iPhone 4 contract in the rest of the night club month.If the contract nitty-gritty is not reach during the end of the contract, DANSHUI Plant will bear much higher(prenominal) cost than revenue that will prove loss to this shew. After study the situation, we withal find out that push back extort and labor cost let contributed to this issue too. For the labor cost, DANSHUI Plant has entrust over work out in labor cost. As compare to the cyphered, this figure is higher and heretofore the target production has not reached. By raise the labor cost nearly 30%, DANSHUI Plant will contend to increase the production line to dawn the increment.And bear in mind that, DANSHUI however has nine months leave. Although DANSHUI Plant raises the labor damage per hour, but we digest observe that this did not dish up DANSHUI Plant to solve the shortage labor force much. Since DANSHUI Plant was construct at the semi- mean labor field, labor cost is cheap. DANSHUI Plant still screwingnot increase the numeral of labor force indigenceed. The issue has contributed to the shortage in production line for the first three months. This is due to DANSHUI Plant is glum rely on handwork by labor.DANSHUI Plant raise the labor scathe is to hire the qualified labor force to push up the production line. As we noted that DANSHUI Plant has tho nine months to ensure everything in targeted and to a fault spread over the difference at the early three months. As the production line is base on handwork, the component import is lite damaged. Large number of materials needs to supplant from that. Therefore a high trained direct labor forces back help to reduce this problem. CONCEPTS AND STRATEGIESBefore proceed with the strategies or concepts, our convocation vex analyzed the strengths and weaknesses of DANSHUI in order to know which strategy DANSHUI should go for. ground on the case, we know that DANSHUI strength is they has had the fortune to get contract from Apple because of the trustingness and by having cheap labor cost that giving them an advantage compare to their competitor. darn the DANSHUI weaknesses is the labor cost. DANSHUI wish to save the labor cost by paying their labor less than one dollar an hour.They as come up have problem in conclusion enough qualified labor to react with their production even though they have raised their manufacturing plant wages by almost 30% since July. This is why the plant is unable to assemble as m each phones as expected and causes the operating at a loss. To overcome the problem regarding to the plant has perf ormed so poorly in the three consecutive months, DANSHUI have to consider for strategic concept to enable the problems plenty be identified and resolved amicably.To turn over this, DANSHUI rear consider the breakeven outline to determine when a business will be able to cover all its expenses and begin to make a profit. This break-even analysis will shows the centre of revenue that need to be suffer in to cover the expenses before a dime of profit have been made. For example, if DANSHUI lavatory attain and surpass their break-even point, which mean that if they can easily bring in more than the amount of gross revenue revenue they need to meet their expenses, then their business stands a full chance of making money.To perform a break-even analysis, DANSHUI have to make enlightened guesses about their expenses and revenues. Although DANSHUI did not have a crystal ball, they should do some full research including an analysis of their market so that they can determine their pro jected sales volume and anticipated expenses. Based on the case, we know that DANSHUI is currently using the noneffervescent work out to measuring stick their performance. However, problem has occurred and the plant manager is considering using flexible cipher to resolve the problem.Flexible budget is based upon assorted levels of performance. It is a very useful bastard for comparing essential costs experience to the cost allowable for the activity level achieved. It is also adjusts the placid budget for the actual level of output. For example, if DANSHUI factory actually produce 200,000 unit of measurements, then managements should compare actual factory costs for 200,000 units to what the factory should have worn out(p) to make 200,000 units, not to what the factory should have spent to make 180,000 units or any other production level.Furthermore, flexible budget distinguishes mingled with fixed and inconstant cost, thereby allowing for a budget that can be automati cally adjusted to the level of activity actually attained. In short, the flexible budget provides a best(p) fortune for think and unconditional than does a static budget. Furthermore, DANSHUI involve to apply the division analysis to measure their business performance and to observe how healthful a business is performing and also how close actual costs and revenues are to expected costs and revenues.In accounting, a random variable is defined as the difference between the expected amount and the actual amount of costs or revenues. The purpose of this expand information is to assist DANSHUI in determine what may have done for(p) duty or wrong and to help the caller in incoming decision-making. RECOMMENDATION DANSHUI caller-up was in reproachful performance by using standard cost budgeting governing body consequences of failing to achieve the 200,000 unit per month target. For the short term we recommend DANSHUI to counterchange from using static budget constitution to the flexible budgeting musical arrangement for evaluation process.Before this, Li was using static budget transcription to evaluate the operation performance, but the evaluation are not comparing applicable information when the actual quantity iPhone assemble are differ from the budget (180,000 unit vs 200,000 unit). By using flexible budget system will help DANSHUI to compare the result with adjustable budget and the pas seul show will more holy show the operation performance. Using the static budget show variance is bad USD 772,000 compare with USD 688,000 in flexible budget system.Flexible budget systems also prove the unfavorable performance caused by the variance from variable cost which is USD 1,041,200. Therefore can analyze and evaluate the weakness in imperious the variable cost which is flash memory, lying and packaging expenses. In long term period, DANSHUI have to overcome shortage in skilled worker by spoil or rent a tool to replacing the man agent in assem bly the iPhone. In assembly process will involve 140 steps and almost all steps are based on handwork and the worker shortage is a barrier to achieve the target.With invest in new machine, DANSHUI can reduce the handwork task but have to appoint some skilled worker to operate the machine. Firstly, DANSHUI have to identify which step in operation can replace by machine. Then, find the applicable machine and analyze the price vs value. If they only want to use the machine for temporary, it is better for DANSHUI to rent quite than buy the machine. other than that, DANSHUI can hiring more skilled lag or increase the total lag to assemble the 200,000 unit iPhone per month.DANSHUI must gather the contract with producing 2. 4 million in one year for the good family with Apple and for getting contract in future. Apple product also had good demand in current and future market, therefore DANSHUI have to take this opportunity to be the sub manufacture for Apple. In process getting new staff, DANSHUI also must maintain their existing staff because the existing staff already puddle experience in 3 month operation of assembly iPhone 4 by increasing reward system.After getting the comfortable staffs, DANSHUI have to increase the monitoring and controlling system to reduce the reject product and also repairing cost. CONCLUSION As to neglige up the discussion, we know that DANSHUI has had difficulty hiring enough workers despite raising wages to 35%. DANSHUI Plant has faced an important issue, that is move to solve the shortage of production line in the first three month and too caught up with the Apple iPhone 4 contracts in the rest of the nine month.After having make known from the plant operation, DANSHUI Plant is not merging with the targeted production line, with is shortage about 10% from the targeted amount. Although DANSHUI manage to produce up to 90% of the contract, but the shortage 10% has result DANSHUI to face loss about $672,000 rather than profit $ 100,000. Therefore, we think that DANSHUI should do an analysis about company strengths, weakness and the opportunities and threats that DANSHUI skill face in the future. Instead of doing the breakeven analysis, DANSHUI can consider using flexible budget to resolve the problem.DANSHUI needed to apply the variance in order to assist DANSHUI in determining what may have gone right or wrong and to help the company in future decision-making. For the short term period, we recommended DANSHUI to change from using static budget system to the flexible budgeting system for evaluation process. DANSUI have to overcome shortage in skilled worker by buy or rent a machine to replacing the man power in assembly the iPhone for the long term period and in the same time, DANSHUI can hiring more skilled staff or increase the total staff to assemble the 200,000 unit iPhone per month as well .REFERENCES i) How to Calculate Total Cost in Economics | eHow. com http://www. ehow. com/how_6201642_calcula te-total-cost-economics. html#ixzz2PryO0OD9 ii) http://www. google. com. my/#hl=ms&q=how++company+ know+revenue+based+upon+FOB+contract%3F&oq=how++company+recognized+revenue+based+upon+FOB+contract%3F&gs_l=serp. 3… 441582. 476078. 14. 477609. 57. 41. 0. 3. 3. 1. 1984. 10543. 12j13j7j3j1j1j1j1j1. 40. 0… 0. 0… 1c. 1. 8. serp. C6aJUxBdYKQ&bav=on. 2,or. &bvm=bv. 44770516,d. bmk&fp=944a8501217e5f2c&biw=1280&bih=699\r\n'