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E11-25 (similar to) The Sunbeam 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: (Click the icon to view the costs.) 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 i More Info Sunbeam manufactured 6,000 CMCBs in 2017 in 30 batches of 200 each. In 2018, Sunbeam anticipates needing 4,000 CMCBs. The CMCBs would be produced in 40 batches of 100 each. The Michigan Corporation has approached Sunbeam about supplying CMCBs to Sunbeam in 2018 at $390 per CMCB on whatever delivery schedule Sunbeam wants. 0 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 Sunbeam purchases CMCBs from Michigan. On the basis of financial considerations alone, should Sunbeam make CMCBs or buy them from Michigan? Show your calculations. 3. Now suppose that if Sunbeam purchases CMCBs from Michigan, its best alternative use of the capacity currently used for CMCBs is to make and sell special circuit boards (CB3s) to the Eleanor Corporation. Sunbeam estimates the following incremental revenues and costs from CB3s: Total expected incremental future reve evenues $2,300,000 Total expected incremental future costs $2,420,000 On the basis of financial considerations alone, should Sunbeam make CMCBs or buy them from Michigan? Show your calculations. Data Table Current Costs in 2017 Expected Costs in 2018 $ 160 $ 165 44 39 1,300 2,000 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 180,000 140,000 360,000 360,000

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