at $300 per CMCB on whatever delivery schedule Svenson wants. Required: 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 $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. Question-3 Strategy, balanced scorecard. Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for 2016 and 2017. 2016 2017 1. Units of D4H produced and sold 200 210 2. Selling price $40,000 $42,000 3. Direct materials (kilograms) 300,000 310,000 4. Direct material cost per kilogram $8 $8.50 5. Manufacturing capacity in units of D4H 250 250 6. Total conversion costs $2,000,000 $2,025,000 7. Conversion cost per unit of capacity (row 6 + row 5) $8,000 $8,100 B. Selling and customer-service capacity 100 customers 95 customers 9. Total selling and customer-service costs $1,000,000 $940,500 10. Selling and customer-service capacity cost per customer $10,000 $9,900 (row 9 + row 8) Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2017. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has 75 customers in 2016 and 80 customers in 2017. Required: 1. Is Stanmore's strategy one of product differentiation or cost leadership? Explain briefly. 2. Describe briefly key measures that you would include in Stanmore's balancedQuestion-1. Robinson Computers makes 5,700 units of a circuit board, CB76, at a cost of $230 each. Variable cost per unit is $180 and fixed cost per unit is $50. Peach Electronics offers to supply 5,700 units of CB76 for $210. If Robinson buys from Peach, it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Robinson accept Peach's offer? Explain. 2. RT Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: Old Machine New Machine Original cost $10,800 $8,80 Useful life 9 years 5 years Current age 4 years 0 years Remaining useful life 5 years 5 years Accumulated depreciation $4,800 Not acquired yet Book value $6,000 Not acquired yet Current disposal value (in cash) $2.800 Not acquired yet Terminal disposal value (5 years from now) SO SO Annual cash operating costs $18,000 $15,000 RT Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should RT Manufacturing replace the old machine? Explain. Question-2 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 in 2017 Costs in 2018 Variable manufacturing costs Direct material cost per CMCB 180 170 Direct manufacturing labor cost per CMCB 50 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