Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 225 comma 000225,000 gear housings for a new off-road vehicle. Owner Luis Borges
Borges Machine Shop, Inc., has a 1-year contract for the production of
225 comma 000225,000
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 | 225 comma 000225,000 | 225 comma 000225,000 | 225 comma 000225,000 |
| Annual fixed cost | $ 150 comma 000$150,000 | $ 200 comma 000$200,000 | $ 500 comma 000$500,000 |
| Per unit variable cost | $ 16.00$16.00 | $ 14.00$14.00 | $ 13.00$13.00 |
The option GPE is best when the contracted volume is below 25,000 units (enter your response as a whole number).
The option FMS is best when the contracted volume is between 25000 250000 units (enter your responses as whole numbers).
The option for DM?
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