Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 250000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the
Borges Machine Shop, Inc., has a 1-year contract for the production of 250000 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:

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
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 $100,000 $16.00 Flexible Manufacturing System (FMS) 250,000 $225,000 $14.00 Dedicated Machine (DM) 250,000 $500,000 $13.00 The option GPE is best when the contracted volume is below 62500 units (enter your response as a whole number). The option FMS is best when the contracted volume is between and units (enter your responses as whole numbers)Step by Step Solution
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