Question

Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and expensive, but efficient, dedicated machine (DM). The cost data follow:

	GPE	FMS	DM
Annual Contracted Units	$200,000	$200,000	$200,000
Annual Fixed Cost	$100,000	$200,000	$500,000
Per unit variable	$15.00	$14.00	$13.00

Which process is best for this contract?

determine the most economical volume for each process.

determine the best pro- cess for each of the following volumes: (1) 75,000, (2) 275,000, and (3) 375,000.

If a contract for the second and third years is pending, what are the implications for process selection?

Answer 1

Date 2一癃100,000 2 most LOnO beween unit 300,000 Fns i the mest copmrld the numba nits are between 1 2 psocesc change ite E 15 (200 0os) 2,1001 o0D 00,000 o t キ1,2 ( 200,000 Thus hese we can sce Flenille manus 두at this con tract

Date the volume- oo units ten GPE ) the best or most economcel r acess units 2. cy (75050000 ueabont the th N O