1-If the contract for the second and third years is pending, for demand below 100,000 units (Options : GPE/FMS/DM

2- For demand above 300,000 units option (GPE/FMS/DM)

Meile Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Larry Meile hopes the contract will be extended and the volume increased next year. Meile 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: General-Purpose Equipment (GPE) 200,000 Flexible Manufacturing System (FMS) Dedicated Machine (DM) Annual contracted units 200,000 200,000 $500,000 Annual fixed cost Per unit variable cost $100,000 $15.00 $200,000 $14.00 $13.00 If the contract for the second and third years is pending, for demand below 100,000 units, option is the best alternative for Larry. For demand above 300,000 units, option is the best alternative for Larry