Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 250,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes
Borges Machine Shop, Inc., has a 1-year contract for the production of 250,000 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: Annual contracted units Annual fixed cost Per unit variable cost General-Purpose Equipment (GPE) 250,000 $125,000 $18.00 Flexible Manufacturing System (FMS) 250,000 $250,000 $14.00 Dedicated Machine (DM) 250,000 $480,000 $13.00 The option GPE is best when the contracted volume is below 31,250 units (enter your response as a whole number). The option FMS is best when the contracted volume is between 31,250 and 230,000 units (enter your responses as whole numbers). The option DM is best when the contracted volume is over | units (enter your response as a whole number).
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