The Serendipity 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 2017and the expected costs in 2018:
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 Total manufacturing costs 6 Data Table Current Costs in 2017 Expected Costs in 2018 200 $ 2,000 1,200 Variable manufacturing costs Direct material cost per CMCB 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 are not made Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if CMCBs are not made 240,000 100,000 440,000 600,000 Print [ Done] ufacturing costs i More Info Serendipity manufactured 4,000 CMCBs in 2017 in 50 batches of 80 each. In 2018, Serendipity anticipates needing 5,000 CMCBs. The CMCBs would be produced in 25 batches of 200 each. The Marrow Corporation has approached Serendipity about supplying CMCBs to Serendipity in 2018 at $250 per CMCB on whatever delivery schedule Serendipity wants. Requirements 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 Serendipity purchases CMCBs from Marrow. On the basis of financial considerations alone, should Serendipity make CMCBs or buy them from Marrow? Show your calculations. 3. Now suppose that if Serendipity purchases CMCBs from Marrow, its best alternative use of the capacity currently used for CMCBs is to make and sell special circuit boards (CB3s) to the Electronic Corporation. Serendipity estimates the following incremental revenues and costs from CB3s: Total expected incremental future revenues $2,500,000 Total expected incremental future costs $2,610,000 On the basis of financial considerations alone, should Serendipity make CMCBs or buy them from Marrow? Show your calculations
