The

SunshineSunshine

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

20172017

and the expected costs in

20182018:

1.	Calculate the total expected manufacturing cost per unit of making CMCBs in 20182018.
2.	Suppose the capacity currently used to make CMCBs will become idle if SunshineSunshine purchases CMCBs from MichiganMichigan. On the basis of financial considerations alone, should SunshineSunshine make CMCBs or buy them from MichiganMichigan? Show your calculations.
3.	Now suppose that if SunshineSunshine purchases CMCBs from MichiganMichigan, its best alternative use of the capacity currently used for CMCBs is to make and sell special circuit boards (CB3s) to the EveningEvening Corporation. SunshineSunshine estimates the following incremental revenues and costs from CB3s:
		Total expected incremental future revenues	$ 1 comma 750 comma 000$1,750,000
		Total expected incremental future costs	$ 1 comma 975 comma 000$1,975,000
	On the basis of financial considerations alone, should SunshineSunshine make CMCBs or buy them from MichiganMichigan? Show your calculations.

	Current Costs	Expected Costs
	in 2017	in 2018
Variable manufacturing costs
Direct material cost per CMCB	$175	$177
Direct manufacturing labor cost per CMCB	58	35
Variable manufacturing cost per batch for setups, materials
handling, and quality control	1,300	1,400
Fixed manufacturing cost
Fixed manufacturing overhead costs that can be avoided if CMCBs
are not made	360,000	980,000
Fixed manufacturing overhead costs of plant depreciation,
insurance, and administration that cannot be avoided even if
CMCBs are not made	420,000	700,000

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

20182018.

	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