Answer Happy

Question 5 Alpha Company manufactures its own modem boards which are an important part of a cellular modem. It reports the following cost information about the costs of making the boards in 2021 and the expected costs in 2022: Costs Current costs in 2021 Expected costs in 2022 Variable manufacturing costs: Direct material cost per board S 180 $ 170 50 45 Direct manufacturing labour cost per board Variable manufacturing cost per batch for setups, materials handling, and quality control 1,600 1,500 Fixed manufacturing cost: Fixed manufacturing overhead costs that can be avoided if the boards are not made 320,000 320,000 Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if the boards are not made 800,000 800,00 Alpha manufactured 8,000 boards in 2021 in 40 batches of 200 each. In 2022, Alpha anticipates needing 10,000 boards. The boards would be produced in 80 batches of 125 each. Beta Company has approached Alpha about supplying the boards to Alpha in 2022 at $300 per board on whatever delivery schedule Alpha wants.
Now suppose that if Alpha purchases the boards from Beta, its best alternative use of the capacity currently used for the boards is to make and sell special circuit boards to Gamma Company. Alpha estimates the following incremental revenues and costs from the special circuit boards: Total expected incremental future revenues Total expected incremental future costs $2,000,000 $2,150,000 On the basis of financial considerations alone, should Alpha make its own modem boards or buy them from Beta? Show your calculations.