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12-25 Make versus buy, activity-based costing. The Svenson Corporation manufactures cellular mo- dems. It manufactures its own cellular modem circuit boards (CMCB), an important part
12-25 Make versus buy, activity-based costing. The Svenson Corporation manufactures cellular mo- dems. 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 2020 and the expected costs in 2021: Current Costs Expected in 2020 Costs in 2021 Variable manufacturing costs Direct material cost per CMCB $ 180 $ 170 Direct manufacturing labor cost per CMCB 50 45 Variable manufacturing cost per batch for setups, materials 1,600 1,500 handling, and quality control Fixed manufacturing cost Fixed manufacturing overhead costs that can be avoided if 320,000 320,000 CMCBs are not made Fixed manufacturing overhead costs of plant depreciation, 800,000 800,000 insurance, and administration that cannot be avoided even if CMCBs are not made Svenson manufactured 8,000 CMCBs in 2020 in 40 batches of 200 each. In 2021, 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 2021 at $300 per CMCB on whatever delivery schedule Svenson wants. 1. Calculate the total expected manufacturing cost per unit of making CMCBs in 2021. 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. a hp
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