Question: Borges Machine shop inc has a 1 year contract for the production of 225,000 gear housings for a new off road vehicle. Owners Luis Borges

Borges Machine shop inc has a 1 year contract for the production of 225,000 gear housings for a new off road vehicle. Owners Luis Borges hope the contract will be extended and the volume increased next year.Borges has developed cost for three alternative. They are general purpose equipment GPE flexible manufacturing system (FMS) and expensive but efficient, dedicated machine (DM).The cost data follow.

Annual contracted units 225,000 (General purpose equipment (GPE) 225,000 ( Flexible MANUFACTURING system (FMS) 225,000 (dedicated machine (DM)

Annual fixed cost $125,000 (General purpose equipment (GPE) 225,000 ( Flexible MANUFACTURING system (FMS) $500,000 (dedicated machine (DM)

Per unit variable cost $16.00 (General purpose equipment (GPE) $14.50 ( Flexible MANUFACTURING system (FMS) $13.50 (dedicated machine (DM)

Based on the cost, the process that best suited for the current contracted volume is GPE, DM , FMS

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