Alans Machine shop, Inc has a 1 year contract for the production of 200,000 gear housing for a new off road vehicle. Owner Matt Martin hopes the contract will be extended and the volume increased next year. Mr. Martin 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:

 

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General-Purpose Equipment (GPE) Flexible Manufacturing System (FMS) Dedicated Machine (DM) Annual contracted units 200,000 200,000 200,000 Annual fixed cost $100,000 $200,000 $450,000 Per unit variable cost $15.50 $14.00 $12.00 a. (6 points) Solve for the crossover points. Show all work b. (4 points) The option GPE is best when the contracted volume is below units (enter your response as a whole number). units The option FMS is best when the contracted volume is between and units The option DM is best when the contracted volume is over units General-Purpose Equipment (GPE) Flexible Manufacturing System (FMS) Dedicated Machine (DM) Annual contracted units 200,000 200,000 200,000 Annual fixed cost $100,000 $200,000 $450,000 Per unit variable cost $15.50 $14.00 $12.00 a. (6 points) Solve for the crossover points. Show all work b. (4 points) The option GPE is best when the contracted volume is below units (enter your response as a whole number). units The option FMS is best when the contracted volume is between and units The option DM is best when the contracted volume is over units

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