Danshui

Using budget data, how many Apple iPhone 4’s would have to have been completed for Danshui Plant No.2 to break even?

Essentially, break-even analysis is used to take a decision when the business or company will be able to cover all of its expenses and begin to create a profit. Consequently, this is important to determine the start-up costs, which will help to identify the amount of sales revenue needed to pay for the ongoing business expenses. As regards, Danshui Plant No. 2, the break-even is:

| |

|Variable Cost = 125.35 + 62.54 + 13.11 + 1.06 |

|= $ 202.06 per unit |

|Fixed Cost = $ 729,000 per month |

|Revenue = $ 41,240,000 / 200,000 unit |

|= $ 206.20 per unit |

|Contribution Margin = $ 206.20 - $ 202.06 |

|= $ 4.14 per unit |

|So the break-even = 729,000/4.14 |

|= 176,086.96 |

|= 176,087 units |

The present production of Danshui is about 180,000 units per month. It shows that above the break-even point of the production. Based on the analysis and prediction above, we can see that Danshui Plant No. 2 will be able to cover all of its expenses as well as to generate profit. The actual production was 2.17% higher than the amount of break-even calculated, but the plant is still facing a loss of $672,000 in August. Thus, the production unit is not the main factor causing the plant to incur the loss of $672,000.

1. Using budget data, what was the total...