Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the

Borges Machine Shop, Inc., has a 1-year contractBorges Machine Shop, Inc., has a 1-year contract

Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 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) 200,000 $150,000 $15.00 Flexible Manufacturing System (FMS) 200,000 $250,000 $14.75 Dedicated Machine (DM) 200,000 $480,000 $13.50 Based on the cost, the process that is best suited for the current contracted volume is GPE DM FMS Metters Cabinets, Inc., needs to choose a production method for its new office shelf, the Maxistand. To help accomplish this, the firm has gathered the following production cost data: Annualized Fixed Cost Process Type of Plant & Equipment Mass Customization $1,260,000 Intermittent $1,000,000 Repetitive $1,600,000 Continuous $1,960,000 Variable Costs (per unit) ($) Labor Material Energy 30 18 12 24 26 20 28 15 12 25 15 10 Metters Cabinets projects an annual demand of 60,000 units for the Maxistand. The selling price for the Maxistand is $120 per unit. a) Based on the projected annual demand, the best alternative available is to use the process. b) The value of annual profit using this method is $ (Enter your response as an inte Intermittent Repetitive Continuous Mass Customization

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!