The Svenson Corporation manufactures cellular modems. It manufactures its own ce

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 2017 and the expected costs in 2018: EE! (Click the icon to view the costs.) Requirement 1. Calculate the total expected manufacturing cost per unit of making CMCBs in 2018. Total Manufacturing Costs of CMCB Manufacturing Cost per Unit Direct materials Direct manufacturing labor Variable batch manufacturing costs Fixed manufacturing costs Avoidable fixed manufacturing costs Unavoidable fixed manufacturing costs otal manufacturing costs Requirement 2. Suppose the capacity currently used to make cM Minton? Show your calculations (If a box is not used in the table leave the box empty do not enter a zero CBs ill become idie if Svenson purchases CMCBs f Choose from any list or enter any number in the mout ielas and theh continue to the next cuestion

Explanation / Answer

Requirement 1 Calculation of the total expected manufacturing cost per unit of making CMCBs in 2018 Units 10000 Total Manufacturing costs of CMCBs Manufacturing cost per unit Direct Materials 1700000 170 Direct manufacturing Labor 450000 45 Variable Batch Manufacturing costs 120000 12 Fixed Manufacturing costs Avoidable fixed manufacturing costs 320000 32 Unavoidable fixed manufacturing costs 800000 80 Total manufacturing costs 3390000 339 Requirement 2 Make Buy Total Per unit Total Per unit Direct Materials 1700000 170 Direct labor 450000 45 Variable Manufacturing costs 120000 12 Avoidable fixed manufacturing costs 320000 32 Cost of Buying 3000000 300 Total costs 2590000 259 3000000 300 Svenson should not buy but make the CMCBs as cost of making is lesser than cost of buying Requirement 3 Make CMCBs & Do not make CB3s Buy CMCBS and do not make CB3s Buy CMCBs and make CB3s Total Incremental costs of Making/Buying CMCBs 2590000 3000000 3000000 (From requirement 2) Excess of future Costs over future revenue from CB3s 150000 Total relevent costs 2590000 3000000 3150000 On the basis of financial consideration alone, Svenson should make CMCBs & should not buy them

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