The

Summer

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

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 labour
Variable batch manufacturing costs
Fixed manufacturing costs
Avoidable fixed manufacturing costs
Unavoidable fixed manufacturing costs
Total manufacturing costs

Requirement 2. Suppose the capacity currently used to make CMCBs will become idle if Summer purchases CMCBs from Mobey. On the basis of financial considerations alone, should

Summer make CMCBs or buy them from Mobey?

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

Summer should

buy --- make

CMCBs because it costs

--less to make than to buy.

--less to buy than to make.

Requirement 3. Now suppose that if Summer 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 Essence Corporation.

Summer estimates incremental revenues from selling CB3s to be $1,900,000, and incremental costs from making CB3s to be $2,050,000.

On the basis of financial considerations alone, should Summer make CMCBs or buy them from Mobey?

Show your calculations. (Complete all answer boxes. For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.)

	Choices for Summer
	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

Summer

will minimize manufacturing costs by

--buying CMCBs and making CB3s

--making CMCBs and not making CB3s

--buying CMCBs and not making CB3s

.

Choose from any list or enter any number in the input fields and then continue to the next question.

	Current Costs	Expected Costs
	in 2017	in 2018
Variable manufacturing costs
Direct material cost per CMCB	$165	$170
Direct manufacturing labour cost per CMCB	35	29
Variable manufacturing cost per batch for setups, materials
handling, and quality control	1,500	1,400
Fixed manufacturing cost
Fixed manufacturing overhead costs that can be avoided if CMCBs
are not made	180,000	980,000
Fixed manufacturing overhead costs of plant depreciation,
insurance, and administration that cannot be avoided even if
CMCBs are not made	540,000	1,400,000

:

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 Summer purchases CMCBs from Mobey. On the basis of financial considerations alone, should Summer make CMCBs or buy them from Mobey? Show your calculations.
3.	Now suppose that if Summer 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 Essence Corporation. Summer estimates the following incremental revenues and costs from CB3s:
		Total expected incremental future revenues Total expected incremental future costs	$1,900,000 $2,050,000
	On the basis of financial considerations alone, should Summer make CMCBs or buy them from Mobey? Show your calculations. Summer manufactured 9,000CMCBs in 2017in 50 batches of 180 each. In2018, Summer anticipates needing 14,000 CMCBs. The CMCBs would be produced in 100 batches of 140 each. The Mobey Corporation has approached Summer about supplying CMCBs to Summer in 2018 at $410 per CMCB on whatever delivery schedule Summer wants.

Costs - x Current Costs Expected Costs in 2017 in 2018 $ 165 $ 170 35 29 Variable manufacturing costs Direct material cost per CMCB Direct manufacturing labour 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 1,500 1,400 are not made 180.000 980.000 Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if CMCBs are not made 540.000 1.400.000 Print Done KEELES