NUST Business School

Course Title: IMA

ASSIGNMENT # 1

Submitted to;
Ms.Qurat ul Ain
Submitted by;

Ahmad Waqas Dar

Date:25th MAY 2019 BS ACF 2K17 B

CASE STUDY 1

Q-1

ANS.

Break Even Point

Price per unit = revenue / unit

= 41,240 / 200

= 206.20

Variable cost per unit = variable cost / unit

= 40,411 / 200

=202.055

Contribution margin = price per unit – variable cost per unit

= 206.20 – 202.055

=4.145

Break even point = fixed cost / contribution margin

= 729 / 4.145

=175.875 units

Q-2

ANS.

TOTAL COST VARIANCE ANALYSIS

Expected cost per unit = total cost / budgeted units

= 41,140,000 / 200,000

=$ 205.70
Actual cost per unit = actual total cost / actual units

= 38,148,000 / 180,000

=$ 211.91

Q-3

ANS.

(180,000 UNITS ) Flexible Budget Variance Performance

Revenue 37116 360 F

Variable costs :

Materials :

Flash memory 4860 389 A

Application process 1935

Chips 2529

Gyroscope 468

8 other chips 122771 ( 128) F

Variable suppliesand tools 11257.20 47.80 A

Subtotal 33820.20 308.80 A

Labor :

Assembly and packaging 2359.80 732.20 A

Shipping 190.80 0.20 A

Total variable costs 36370.80 1041.20 A

Fixed costs :
Factory rent 400

Machine depreciation 150

Utility fee and taxes 52

Supervision total fixed costs 127 7 A

Total fixed costs 729 7 A

Total cost 37099.80 1048.20 A

Net income $ 16.20 ( 688.20 ) A

*compared it with actual data given in question

Q-4

ANS.

VARIANCE ANALYSIS

FLASH MEMORY
Direct material price variance =(actual price – standard price ) x actual quantity

=( 29.16 – 27 ) x 180,000

= $ 388,800 A

Direct material quantity variance = ( actual quantity – standard quantity ) x actual price

= ( 180,000 – 200,000 ) x 29.16

= $ 540,000 F

Total Material variance = price variance – usage variance

= 388,800 – 540,000

= $ 151,200 F

Labor
Direct labour rate variance = ( actual rate – standard rate ) actual hour

= ( 17.18 – 13.11 ) x 180,000

= $ 732,600 A

Direct labor efficiency variance = ( actual hour – standard hour ) x standard rate

= ( 180,000 – 200,000 ) x 13.11

= $ 262,200 F

Total labor variance = labor variance – efficiency variance

= 732,600 A – 262,200 F

=$ 470,400 A

Fixed overhead spending variance = actual fixed manufacturing oh – standard fixed manufacturing oh

= 736,000 – 729,000

= $ 7,000 A

Q-5

ANS .Wentao chen should adapt the following strategies for iphone 4 contract :
1. Outsourcing
2. Increment in wages
3. Salary for performance policy
4. Scheduling of overtime
5. Trainings preferably short