7.1 answer:

7.2 & 7.3 answers:

Can you solve just 7.4 please? I have provided the answers for 7.1-7.3

7.1 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: General-Purpose Equipment GPE) Flexible Manufacturing System (FMS) Dedicated Machine (DM) 200,000 200,000 200,000 Annual contracted units Annual fixed cost $100,000 $200,000 $500,000 Per unit variable cost $ 15.00 $ 14.00 $ 13.00 Which process is best for this contract? PX 7.2 Using the data in Problem 7.1, determine the most economical volume for each process. PX 7.3 Using the data in Problem 7.1, determine the best process for each of the following volumes: (1) 75,000, (2) 275,000, and (3) 375,000. 7.4 Refer to Problem 7.1. If a contract for the second and third years is pending, what are the implications for process - selection? For GPE Annual contracted unit(Q) = 200000 units Fixed cost (FC) = $100000 Variable cost (VC) = $15 Total cost = FC +(Q VC) = 100000 + (200000 > 15) = 100000 + 3000000 = $3100000 For FMS . . Annual contracted unit(Q) = 200000 units Fixed cost (FC) = $200000 Variable cost (VC) = $14 Total cost = FC + (Q VC) = 200000 + (200000 x 14) = 200000 + 2800000 = $3000000 . For DM . . Annual contracted unit(Q) = 200000 units Fixed cost (FC) = $500000 Variable cost (VC) = $13 Total cost = FC + (Q VC) = 500000 + (200000 > 13) = 500000 + 2600000 = $3100000 . So for this contract FMS is best as it has the lowest total cost. 7.2 GPE DM Location Fixed Cost (FC) Variable Cost (VC) 100,000 15 FMS 200,000 14 500,000 13 DM Quantity (Q) 0 100,000 230,000 Total Cost = FC + Q * VC GPE FMS 100,000 200,000 500,000 1,600,000 1,600,000 1,800,000 3,550,000 3,420,000 3,490,000 Crossover point between GPE & FMS = (200000 - 100000)/(15 - 14) = 100000 Crossover point between FMS & DM = (500000 - 200000)/(14 - 13) = 300000 Alternative GPE Most economical volume (Q) 0