The Savannah 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: 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 Savannah purchases CMCBs from Mobey. On the basis of financial considerations alone, should Savannah make CMCBs or buy them from Mobey? Show your calculations. 3. Now suppose that if Savannah purchases CMCBs from Mobey, its best alternative use of the capacity currently used for CMCBs is to make and sell special circuit boards (CB3s) to the Electronic Corporation. Savannah estimates the following incremental revenues and costs from CB3s: Total expected incremental future revenues $2,100,000 Total expected incremental future costs $2,225,000 On the basis of financial considerations alone, should Savannah make CMCBs or buy them from Mobey? Show your calculations. Current Costs Expected Costs in 2017 in 2018 Variable manufacturing costs Direct material cost per CMCB 188 $ 185 60 39 Direct manufacturing labor cost per CMCB Variable manufacturing cost per batch for setups, materials handling, and quality control Fixed manufacturing cost Fixed manufacturing overhead costs that can be avoided if CMCBs 1,750 1,500 are not made 665,000 200,000 Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if CMCBs are not made 950,000 275,000 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 11 Unavoidable fixed manufacturing costs Total manufacturing costs The Savannah 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: 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 Savannah purchases CMCBs from Mobey. On the basis of financial considerations alone, should Savannah make CMCBs or buy them from Mobey? Show your calculations. 3. Now suppose that if Savannah purchases CMCBs from Mobey, its best alternative use of the capacity currently used for CMCBs is to make and sell special circuit boards (CB3s) to the Electronic Corporation. Savannah estimates the following incremental revenues and costs from CB3s: Total expected incremental future revenues $2,100,000 Total expected incremental future costs $2,225,000 On the basis of financial considerations alone, should Savannah make CMCBs or buy them from Mobey? Show your calculations. Current Costs Expected Costs in 2017 in 2018 Variable manufacturing costs Direct material cost per CMCB 188 $ 185 60 39 Direct manufacturing labor cost per CMCB Variable manufacturing cost per batch for setups, materials handling, and quality control Fixed manufacturing cost Fixed manufacturing overhead costs that can be avoided if CMCBs 1,750 1,500 are not made 665,000 200,000 Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if CMCBs are not made 950,000 275,000 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 11 Unavoidable fixed manufacturing costs Total manufacturing costs