Current Costs Expected Costs in 2017 in 2018 Variable manufacturing costs Direct material cost per CMCB Direct manufacturing labor cost per CMCB $ 180 $ 170 50 149 45 Variable manufacturing cost per batch for setups, materials handling, and quality control 1,600 1,500 Fixed manufacturing cost Fixed manufacturing overhead costs that can be avoided if CMCBS are not made 320,000 320,000 Fixed manufacturing overhead costs of plant depreciation, insurance and administration that cannot be avoided even if Variable manufacturing costs Direct material cost per CMCB Direct manufacturing labor cost per CMCB $ 180 $ 50 170 45 Variable manufacturing cost per batch for setups, materials handling, and quality control 1,600 1,500 Fixed manufacturing cost Fixed manufacturing overhead costs that can be avoided if CMCBs are not made 320,000 320,000 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. 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. Requirement 1. Calculate the total expected manufacturing cost per unit of making CMCBs in 2018. Direct materials Direct manufacturing labor Variable batch manufacturing costs Fixed manufacturing costs Avoidable fixed manufacturing costs Unavoidable fixed manufacturing costs Total manufacturing costs Total Manufacturing Manufacturing Costs of CMCB Cost per Unit Requirement 1. Calculate the total expected manufacturing cost per unit of making CMCBs in 2018. Direct materials Direct manufacturing labor Variable batch manufacturing costs Fixed manufacturing costs Avoidable fixed manufacturing costs Unavoidable fixed manufacturing costs Total manufacturing costs Total Manufacturing Manufacturing Costs of CMCB Cost per Unit Requirement 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. (If a box is not used in the table, leave the box empty; do not enter a zero.) Total relevant costs Make Buy Total Per Unit Total Per Unit Svenson should CMCBS because it costs Requirement 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 incremental revenues from selling CB3s to be $2,000,000, and incremental costs from making CB3s to be $2,150,000. On the basis of financial considerations alone, should Svenson make CMCBs or buy them from Minton? Show your calculations. (Complete all answer boxes. For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.) Choices for Svenson Make CMCBS and Do Not Buy CMCBs and Do Not Buy CMCBs and Make Relevant Items Make CB3s Make CB3s CB3s Total incremental costs of Relevant Items Total incremental costs of making/buying CMCBs (from requirement 2) Excess of future costs over future revenues from CB3s Total relevant costs Svenson will minimize manufacturing costs by Make CMCBs Buy CMCBs and Do Not and Do Not Make CB3s Make CB3s Buy CMCBs and Make CB3s