Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 250,000 gear housings for a newoff-road vehicle. Owner Luis Borges hopes the contract
Borges Machine Shop, Inc., has a 1-year contract for the production of
250,000
gear housings for a newoff-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 | 250,000 | 250,000 | 250,000 |
| Annual fixed cost | $125,000 | $225,000 | $525,000 |
| Per unit variable cost | $16.00 | $14.00 | $13.00 |
The option GPE is best when the contracted volume is below
5000050000
units (enter your response as a wholenumber).
The option FMS is best when the contracted volume is between
5000050000
and
300,000300,000
units (enter your responses as whole numbers).
The option DM is best when the contracted volume is over
nothing
units (enter your response as a whole number).
| General-Purpose Equipment (GPE) | Flexible Manufacturing System (FMS) | Dedicated Machine (DM) | |
| Annual contracted units | 225,000 | 225,000 | 225,000 |
| Annual fixed cost | $125,000 | $250,000 | $525,000 |
| Per unit variable cost | $16.00 | $14.00 | $13.00 |
The option GPE is best when the contracted volume is below
62,50062,500
units (enter your response as a wholenumber).
The option FMS is best when the contracted volume is between
nothing
and
nothing
units (enter your responses as whole numbers).
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