Jackson Custom Machine Shop has a contract for 130,000 units of a new product. Sam Jumper, the

Question:

Jackson Custom Machine Shop has a contract for 130,000 units of a new product. Sam Jumper, the owner, has calculated the cost for three process alternatives. Fixed costs will be: for general-purpose equipment (GPE), $150,000; flexible manufacturing (FMS), $350,000; and dedicated automation (DA), $950,000. Variable costs will be: GPE, $10; FMS, $8; and DA, $6. Which should he choose?