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Current Costs Expected Costs in 2018 in 2017 Variable manufacturing costs Direct material cost per CMCB Direct manufacturing labor cost per CMCB Variable manufacturing cost per batch for setups, materials handling, and quality control Fixed manufacturing cost 180 170 50 45 1,600 1,500 Fixed manufacturing overhead costs that can be avoided if CMCBS 320,000 320,000 are not made Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if CMCBS are not made 800,000 800,000 Svenson manufactured 8,000 CMCBS in 2017 in 40 batches of 200 each. In 2018, Svenson anticipates needing 10,000 CMCBS. The CMCBS would be produced in 80 batches of 125 each. The Minton Corporation has approached Svenson about supplying CMCBS to Svenson in 2018 at $300 per CMCB on whatever delivery schedule Svenson wants. 1. Calculate the total expected manufacturing cost per unit of making CMCBS in 2018. 2. Suppose the capacity currently used to make CMCBS will become idle if Svenson purchases CMCBS from Minton. On the basis of financial considerations alone, should Svenson make CMCBS or buy them from Minton? Show your calculations. Required 3. Now suppose that if Svenson purchases CMCBS from Minton, its best alternative use of the capacity currently used for CMCBS is to make and sell special circuit boards (CB3S) to the Essex Corporation. Svenson estimates the following incremental revenues and costs from CB3S: Total expected incremental future revenues Total expected incremental future costs $2,000,000 $2,150,000 On the basis of financial considerations alone, should Svenson make CMCBS or buy them from Minton? Show your calculations.

Current Costs Expected Costs in 2018 in 2017 Variable manufacturing costs Direct material cost per CMCB Direct manufacturing labor cost per CMCB Variable manufacturing cost per batch for setups, materials handling, and quality control Fixed manufacturing cost 180 170 50 45 1,600 1,500 Fixed manufacturing overhead costs that can be avoided if CMCBS 320,000 320,000 are not made Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if CMCBS are not made 800,000 800,000 Svenson manufactured 8,000 CMCBS in 2017 in 40 batches of 200 each. In 2018, Svenson anticipates needing 10,000 CMCBS. The CMCBS would be produced in 80 batches of 125 each. The Minton Corporation has approached Svenson about supplying CMCBS to Svenson in 2018 at $300 per CMCB on whatever delivery schedule Svenson wants. 1. Calculate the total expected manufacturing cost per unit of making CMCBS in 2018. 2. Suppose the capacity currently used to make CMCBS will become idle if Svenson purchases CMCBS from Minton. On the basis of financial considerations alone, should Svenson make CMCBS or buy them from Minton? Show your calculations. Required 3. Now suppose that if Svenson purchases CMCBS from Minton, its best alternative use of the capacity currently used for CMCBS is to make and sell special circuit boards (CB3S) to the Essex Corporation. Svenson estimates the following incremental revenues and costs from CB3S: Total expected incremental future revenues Total expected incremental future costs $2,000,000 $2,150,000 On the basis of financial considerations alone, should Svenson make CMCBS or buy them from Minton? Show your calculations.

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter11: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 11.2E: Identify cost graphs The following cost graphs illustrate various types of cost behavior: For each...
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Make versus buy, activity-based costing. The Svenson Corporation manufactures cellular modems. It manufactures its own cellular modem circuit boards (CMCB), an important part of the cellular modem. It reports the following cost information about the costs of making CMCBs in 2017 and the expected costs in 2018:

Current Costs Expected Costs in 2018 in 2017 Variable manufacturing costs Direct material cost per CMCB Direct manufacturing labor cost per CMCB Variable manufacturing cost per batch for setups, materials handling, and quality control Fixed manufacturing cost 180 170 50 45 1,600 1,500 Fixed manufacturing overhead costs that can be avoided if CMCBS 320,000 320,000 are not made Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if CMCBS are not made 800,000 800,000 Svenson manufactured 8,000 CMCBS in 2017 in 40 batches of 200 each. In 2018, Svenson anticipates needing 10,000 CMCBS. The CMCBS would be produced in 80 batches of 125 each. The Minton Corporation has approached Svenson about supplying CMCBS to Svenson in 2018 at $300 per CMCB on whatever delivery schedule Svenson wants. 1. Calculate the total expected manufacturing cost per unit of making CMCBS in 2018. 2. Suppose the capacity currently used to make CMCBS will become idle if Svenson purchases CMCBS from Minton. On the basis of financial considerations alone, should Svenson make CMCBS or buy them from Minton? Show your calculations. Required
Transcribed Image Text:Current Costs Expected Costs in 2018 in 2017 Variable manufacturing costs Direct material cost per CMCB Direct manufacturing labor cost per CMCB Variable manufacturing cost per batch for setups, materials handling, and quality control Fixed manufacturing cost 180 170 50 45 1,600 1,500 Fixed manufacturing overhead costs that can be avoided if CMCBS 320,000 320,000 are not made Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if CMCBS are not made 800,000 800,000 Svenson manufactured 8,000 CMCBS in 2017 in 40 batches of 200 each. In 2018, Svenson anticipates needing 10,000 CMCBS. The CMCBS would be produced in 80 batches of 125 each. The Minton Corporation has approached Svenson about supplying CMCBS to Svenson in 2018 at $300 per CMCB on whatever delivery schedule Svenson wants. 1. Calculate the total expected manufacturing cost per unit of making CMCBS in 2018. 2. Suppose the capacity currently used to make CMCBS will become idle if Svenson purchases CMCBS from Minton. On the basis of financial considerations alone, should Svenson make CMCBS or buy them from Minton? Show your calculations. Required
3. Now suppose that if Svenson purchases CMCBS from Minton, its best alternative use of the capacity currently used for CMCBS is to make and sell special circuit boards (CB3S) to the Essex Corporation. Svenson estimates the following incremental revenues and costs from CB3S: Total expected incremental future revenues Total expected incremental future costs $2,000,000 $2,150,000 On the basis of financial considerations alone, should Svenson make CMCBS or buy them from Minton? Show your calculations.
Transcribed Image Text:3. Now suppose that if Svenson purchases CMCBS from Minton, its best alternative use of the capacity currently used for CMCBS is to make and sell special circuit boards (CB3S) to the Essex Corporation. Svenson estimates the following incremental revenues and costs from CB3S: Total expected incremental future revenues Total expected incremental future costs $2,000,000 $2,150,000 On the basis of financial considerations alone, should Svenson make CMCBS or buy them from Minton? Show your calculations.
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