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Cost and Management Accounting Assignment on Apple and Foxconn
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Added on 2019-09-30
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This assignment analyzes the profitability of Foxconn's iPhone manufacturing for Apple and provides improvement ideas. It also considers the costs and benefits of moving manufacturing from China to the US. The assignment includes calculations of gross profit, contribution margin, break-even point, and target operating profit. It also requires a self-reflection on the learning experience.
Cost and Management Accounting Assignment on Apple and Foxconn
Added on 2019-09-30
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QUEENSLAND UNIVERSITY OF TECHNOLOGYQUT Business SchoolSchool of AccountancyAYN414 Cost and Management AccountingSEMESTER ONE 2018ASSESSMENT ITEM 2: Written Assignment(Weighting Total: 20%)Due Date and Time:Wednesday 18th April 2018 @ 5pmSubmission:Submission via Blackboard – see the Assessment area of the AYN414 Blackboard siteLength:1,000 words (+/- 10% AND excluding references)Team or Individual:IndividualThis assessment item assesses the following learning outcomes:Knowledge and Technical Skills (KS) 1.1 Demonstrate and apply integrated and advanced discipline and professional practice knowledge, including knowledge of relevant research principles and methods.Higher Order Thinking Skills (HO) 2.1 Critically investigate real world business issues and problems drawing on analysis, evaluation and synthesis of discipline knowledge, including theory and practice.Professional Communication (PC)3.1 Use information literacy skills and communicate effectively and professionally in written forms and using media appropriate for diverse purposes, contexts and audiences.Teamwork & Self (TS)4.1 Exercise self-reflection and accountability in applying knowledge and skills for own learning andeffective practice.1
Apple & Foxconn You are a management accounting working at Apple. Your manager, Lucy Zhang, has asked you to gatherinformation on the profitability of one of the factories that manufacture iPhones. Apple is consideringthe financial implications of moving the manufacture and assembly from one of its small factories inChina to the U.S. The management of Apple is having a meeting with Foxconn – Apple’s currentcontracted manufacturer - in one week and they need some high-level numbers to take to the meetingon the financial consequences of moving the manufacturing and assembly process to the U.S state ofWisconsin. You have been given some information from Foxconn on the costs of manufacture/assemblybut this is not in the detail that you would have preferred. Your boss can’t wait for the detailed costsfrom Foxconn and needs some general figures to guide their initial discussions and has told you to makeyour own judgements where you are missing figures. She has also said these costs are from a smallChinese factory that has just started manufacturing in the last couple of months. You will have to makesome professional judgements where you do not have all the information you need. Foxconn Technology Group (FTG) is a Taiwanese multinational company that manufactures electronicproducts and is contracted by Apple to manufacture many of its products such as the iPhone, and iPad.Foxconn has factories in Asia, Brazil, Europe, and Mexico and together these factories produceapproximately 40 percent of the consumer electronics products sold worldwide. Most of these factoriesare in China where Foxconn currently employs over a million people. ‘Foxconn's largest factoryworldwide is in Longhua Town, Shenzhen, where hundreds of thousands of workers (varying countsinclude 230,000, 300,000, and 450,000) are employed at the Longhua Science & Technology Park, awalled campus sometimes referred to as “Foxconn City”. Covering about 1.16 square miles (3 square km),it includes 15 factories, worker dormitories, 4 swimming pools, a fire brigade, its own television network(Foxconn TV), and a city centre with a grocery store, bank, restaurants, bookstore, and hospital. Whilesome workers live in surrounding towns and villages, others live and work inside the complex; a quarterof the employees live in the dormitories, and many of them workup to 12 hours a day for 6 days each week’1.Labour costs in China are much cheaper than many other countriesalthough they have been recently increasing, with the averagehourly wages around $3.60 in 2016 an increase in 64% since 2011.These hourly rates are still ‘more than five times hourlymanufacturing wages in India, and [are] more on par with countriessuch as Portugal and South Africa’2.Key to the success of Apple is a business model that combines a luxurybrand marketing and pricing strategy with low-cost production and assembly through outsourcing themanufacturing component of the value chain. This has been a very successful strategy that has ensuredApple’s profits have continued to increase across its product range.Apple has used Foxconn to manufacture its products in China including its most profitable product- theiPhone. 1https://en.wikipedia.org/wiki/Foxconn. Accessed 3/8/172https://www.cnbc.com/2017/02/27/chinese-wages-rise-made-in-china-isnt-so-cheap-anymore.html. Accessed 3/8/172Source: Businessinsider.com.au
Recent iPhone’s assembled by Foxconn China include:The iPhone 5sThe iPhone 6The iPhone 6 Plus.Details relating to the assembly costs of Apple’s three iPhones are as follows:Figure 1: Summary of iPhone costsSource: teardown.com iPhone 5sThe 5s comes with a touchscreen display it is powered by 1.3GHz dual-core Apple A7 (64-bit ARMv8)processor and has two cameras - a primary camera on the rear and a secondary camera for selfies. TheApple iPhone 5s runs iOS 7 software and is powered by a non-removable battery. Foxconn assembles theiPhone 5s from materials provided by other suppliers. The main components include the display/touchscreen, memory, camera and battery (there are other misc components). The production process involves machine automation (robots manufacture the external case) andmanual workers who assemble the rest of the phone and test it is working. The robot is operated by amachine operator and it takes on average 10 minutes of machine time to make one base of the iPhone5s. The phone then moves to assembly where the factory assembly workers complete the assembly3
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