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$)$

Annual Contracted Units $200,000200,000200,000$

Annual Fixed Cost $$100,000$ $$200,000$ $$500,000$

Per Unit Variable Cost $$15$ $$14$ $$13$

$($a$)$ Which process is best for this contract?

$($b$)$ Determine the most economical volume for each process