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School of Accountancy
AYN414 Cost and Management Accounting
ASSESSMENT ITEM 2: Written Assignment
(Weighting Total: 20%)
Length: 1,000 words (excluding references)
Team or Individual: Individual
This 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 and effective practices
Apple & Foxconn
You are a management accounting working at Apple. Your manager, Lucy Zhang, has asked you to gather information on the profitability of one of the factories that manufacture iPhones. Foxconn is considering the financial implications of moving the manufacture and assembly from one of its small factories in China to the U.S. The management of Apple is having a meeting with Foxconn – Apple’s current contracted manufacturer in one week and they need some high-level numbers to take to the meeting on the financial consequences of moving the manufacturing and assembly process to the U.S state of Wisconsin. You have been given some information from Foxconn on the costs of manufacture/assembly but this is not in the detail that you would have preferred. Your boss can’t wait for the detailed costs from Foxconn and needs some general figures to guide their initial discussions and has told you to make your own judgements where you are missing figures. She has also said these costs are from a small Chinese factory that has just started manufacturing in the last couple of months. You will have to make some professional judgements where you do not have all the information you need.
Foxconn Technology Group (FTG) is a Taiwanese multinational company that manufactures electronic products 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 produce approximately 40 percent of the consumer electronics products sold worldwide. Most of these factories are in China where Foxconn currently employs over a million people. ‘Foxconn`s largest factory worldwide is in Longhua Town, Shenzhen, where hundreds of thousands of workers (varying counts include 230,000, 300,000, and 450,000) are employed at the Longhua Science & Technology Park, a walled 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. While some workers live in surrounding towns and villages, others live and work inside the complex; a quarter of the employees live in the dormitories, and many of them work up to 12 hours a day for 6 days each week’.
Labour costs in China are much cheaper than many other countries although they have been recently increasing, with the average hourly wages around $3.60 in 2016 an increase in 64% since 2011. These hourly rates are still ‘more than five times hourly manufacturing wages in India, and [are] more on par with countries such as Portugal and South Africa’.
Key to the success of Apple is a business model that combines a luxury brand marketing and pricing strategy with low-cost production and assembly through outsourcing the manufacturing component of the value chain. This has been a very successful strategy that has ensured Apple’s profits have continued to increase across its product range.
Apple has used Foxconn in China to manufacture its products including its most profitable product- the iPhone. Recent iPhone’s assembled by Foxconn China include:
Details relating to the assembly costs of Apple’s three iPhones are as follows:
Figure 1: Summary of iPhone costs
The 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. The Apple iPhone 5s runs iOS 7 software and is powered by a non-removable battery. Foxconn assembles the iPhone 5s from materials provided by other suppliers. The main components include the display/touch screen, memory, camera and battery (there are other misc components).
The production process involves machine automation (robots manufacture the external case) and manual workers who assemble the rest of the phone and test it is working. The robot is operated by a machine operator and it takes on average 10 minutes of machine time to make one base of the iPhone 5s. The phone then moves to assembly where the factory assembly workers complete the assembly adding components such as the memory, camera battery and the display/touch screen and finally it is tested.
The iPhone 6 has a larger 4.7” HD screen and a new A8 chip processor and new isight camera. Production follows a similar process as for the 5s. The production process involves machine automation (robots manufacture the slimline external case) and manual workers who assemble the rest of the phone and test it is working. The robot is operated by a machine operator and it takes on average 20 minutes for the robot to make the base of one iPhone6. The phone then moves to assembly where the factory assembly workers complete the assembly adding components such as the memory, camera battery and the display/touch screen and finally it is tested.
The iPhone 6 plus
The iPhone 6 plus has a larger again 5.5” HD screen and the new A8 chip processor. The camera is 8 megapixels. Production follows a similar process as for the iPhone 6. The production process involves machine automation (robots manufacture the slimline external case) and manual workers who assemble the rest of the phone and test it is working. The robot is operated by a machine operator and it takes on average 30 minutes for the robot to make the base of one iPhone6. The phone then moves to assembly where the factory assembly workers complete the assembly adding components such as the memory, camera battery and the display/touch screen and finally it is tested.
During the 2013‑14 financial year, the price Foxconn is paid for manufacturing each iPhone is below:
- the iPhone 5s was $240;
- the iPhone 6 was $257; and
- the iPhone 6 plus was $272.
Additional Accounting information
After a meeting with your boss Lucy Zhang, you have obtained the following information regarding for the year ending 30 June 2014.
Number of phones manufactured (budget)
Number of phones manufactured (actual)
Raw material costs
A breakdown of the raw material costs for each phone has been given in Figure 1. Some of these are direct and some might be better classified as indirect. You will need to decide how to break up these costs.
$ per hour
Factory Assembly Line
Total number of machine hours
Machine hours (budgeted and actual)
The following information relates to other costs incurred by Foxconn for the year ended 30 June 2014 (these costs cannot be traced easily to any particular iphone:
Consumables – production facility
Depreciation – robot machinery
Depreciation – office equipment
Depreciation – office furniture
Robot design costs
Rental – office
Rental – production facility
Research and development - robots
Salaries – Administrative staff
Salaries – Executive management
Salaries – Production supervisor
Salaries – Factory quality inspector
Utilities – water and electricity
At a brief meeting to discuss the project, Lucy was able to provide clarification on some of these costs:
TASK – Lucy Zhang your boss at Apple has asked you to provide her with a report on Foxconn’s current business profitability and improvement ideas. You are required to:
PART A (10 marks)
(1) Analyse the profitability of the three products. In order to do this you will need to:
(2) Analyse the profitability of the Foxconn factory. In order to do this you will need to:
PART B (5 marks)
In July 2017 Foxconn announced it would build a factory in Wisconsin, United States to produce flat-screen displays. It is now considering whether it should also move some or all of its iPhone manufacturing to the US. You need to write a report that will provide an answer to the following questions:
(1) Should Foxconn move some or all of its iPhone manufacture to the United States? Consider the costs and benefits of moving manufacturing from China to the US. These will only be estimates of the costs and benefits for Foxconn/Apple of doing this. You can rely on the figures you have calculated as the basis of this report.
(2) What other qualitative factors are going to be important in making this decision? You should also consider what changes are being made in manufacturing and what implications this will have on future manufacturing costs for iPhones.
You should reference any textbooks, websites, newspapers or reports that you use to answer these questions. Check the correct referencing to use as outlined by QUT’s citewrite guide. http://www.citewrite.qut.edu.au/
Presentation of Report (Part B)
You will need to consider how you present this report as you will be marked on the presentation of your report. Part A should be answered using excel (with workings), and Part B and C can be answered in any format that you decide.
PART C (Individual submission) (5 marks)
A successful accounting professional uses the idea of self-reflection to improve their skills in the workplace. Reflecting on your experience of completing this assignment, write a self-reflection that puts into writing your learning experiences. You should think about the following questions to help you in this task:
For example, did you feel like you had a sound knowledge base of the key topics before your started or did this assignment show you how much you had not grasped?
TOTAL MARKS : 20 marks
Horngren, C.T., Datar, S.M., Rajan, M.V., Wynder, M., Maguire, W. & Tan, R. (2014). Cost Accounting: A Managerial Emphasis (2nd ed.). Frenchs Forest, NSW: Pearson Australia.
 https://en.wikipedia.org/wiki/Foxconn. Accessed 3/8/17
 https://www.cnbc.com/2017/02/27/chinese-wages-rise-made-in-china-isnt-so-cheap-anymore.html. Accessed 3/8/17