Soal 7 Decision Making
Problem 1 – Make or Buy Decision
The Step Son Company 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 2014 and the expected costs in 2015:
Current Costs in 2014
Expected Costs in 2015
Variables Manufacturing Costs
DM Per Unit $ 180 $ 170
DML per Unit $ 50 $ 45
Variable MOH per Batch $ 1,600 $ 1,500
Fixed Manufacturing Cost
Fixed MOH that can be avoided if CMCBs are not made $ 320,000 $ 320,000
Fixed MOH that can 't be avoided even if CMCBs are not made $ 800,000 $ 800,000
Step Son manufactures CMCBs in 2014 in 40 batches of 200 each. In 2015, Step Son anticipates needing 10.000 CMCBs would be produced in 80 batches of 125 each.
The Mind Blown Corp has approached Step Son about supplying CMCBs to Step Son in 2015 at $300 per CMCB on whatever delivery schedule Step Son wants.
1. Calculate the total expected manufacturing cost per unit of making CMCBs in 2015.
2. Suppose the capacity currently used to make CMCBs will become idle if Step Son purchases CMCBs from Mind Blown. On the basis of financial considerations alone, should Step Son make CMCBs or buy them from Mind Blown? Show your calculations.
3. Now suppose that if Step Son purchases CMCBs from Mind Blown, its best alternatives use of the capacity currently used for CMCBs is to make and sell special circuit boards (CB3s) to the Temasek Corporation. Step Son estimates the following incremental revenues and costs from CB3s :
Total expected incremental futures revenues $2.000.000
Total expected incremental futures costs $2.150.000
On the basis of financial considerations alone, should Step Son make CMCBs or buy them from Mind Blown? Show your calculations!
Problem 2 – Special Order
The Medallion Company
The Step Son Company 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 2014 and the expected costs in 2015:
Current Costs in 2014
Expected Costs in 2015
Variables Manufacturing Costs
DM Per Unit $ 180 $ 170
DML per Unit $ 50 $ 45
Variable MOH per Batch $ 1,600 $ 1,500
Fixed Manufacturing Cost
Fixed MOH that can be avoided if CMCBs are not made $ 320,000 $ 320,000
Fixed MOH that can 't be avoided even if CMCBs are not made $ 800,000 $ 800,000
Step Son manufactures CMCBs in 2014 in 40 batches of 200 each. In 2015, Step Son anticipates needing 10.000 CMCBs would be produced in 80 batches of 125 each.
The Mind Blown Corp has approached Step Son about supplying CMCBs to Step Son in 2015 at $300 per CMCB on whatever delivery schedule Step Son wants.
1. Calculate the total expected manufacturing cost per unit of making CMCBs in 2015.
2. Suppose the capacity currently used to make CMCBs will become idle if Step Son purchases CMCBs from Mind Blown. On the basis of financial considerations alone, should Step Son make CMCBs or buy them from Mind Blown? Show your calculations.
3. Now suppose that if Step Son purchases CMCBs from Mind Blown, its best alternatives use of the capacity currently used for CMCBs is to make and sell special circuit boards (CB3s) to the Temasek Corporation. Step Son estimates the following incremental revenues and costs from CB3s :
Total expected incremental futures revenues $2.000.000
Total expected incremental futures costs $2.150.000
On the basis of financial considerations alone, should Step Son make CMCBs or buy them from Mind Blown? Show your calculations!
Problem 2 – Special Order
The Medallion Company