Requirement 1. Calculate the total expected manufacturing cost per unit of making CMCBs in

2018.

	Total Manufacturing	Manufacturing
	Costs of CMCB	Cost per Unit
Direct materials
Direct manufacturing labor
Variable batch manufacturing costs
Fixed manufacturing costs
Avoidable fixed manufacturing costs
Unavoidable fixed manufacturing costs
Total manufacturing costs

Part 2

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.)

	Make		Buy
	Total	Per Unit	Total	Per Unit
Total relevant costs

Part 3

Svenson

should

buy

make

CMCBs because it costs

less to make than to buy.

less to buy than to make.

Part 4

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	Buy CMCBs	Buy CMCBs
	and Do Not	and Do Not	and Make
Relevant Items	Make CB3s	Make CB3s	CB3s
Total incremental costs of
making/buying CMCBs (from
requirement 2)
Excess of future costs over future
revenues from CB3s
Total relevant costs

Part 5

Svenson

will minimize manufacturing costs by

buying CMCBs and making CB3s

making CMCBs and not making CB3s

buying CMCBs and not making CB3s

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.

pnson purchases CMCBs from Minton. On the basis of financial considerations alone, should Svenson able, leave the box empty; do not enter a zero.)