The Svenson Corporation manufactures cellular modems. It manufactures its own cellular modem circuit boards (CMCB), an important

Question:

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 2006 and the expected costs in 2007:

The Svenson Corporation manufactures cellular modems. It manufactures its own

Svenson manufactured 8,000 CMCBs in 2006 in 40 batches of 200 each. In 2007, 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 2007 at $300 per CMCB on whatever delivery schedule Svenson wants.
Required
1. Calculate the total expected manufacturing cost per unit of making CMCBs in 2007.
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.
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 ........................ $2,000,000
Total expected incremental future costs ............................. $2,150,000
On the basis of financial considerations alone, should Svenson make CMCBs or buy them from Minton? Show your calculations.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0131495388

12th edition

Authors: Charles T. Horngren, Srikant M. Datar, George Foster

Question Posted: