Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 250 comma 000250,000 gear housings for a new off-road vehicle. Owner Luis Borges

Borges Machine Shop, Inc., has a 1-year contract for the production of

250 comma 000250,000

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

250 comma 000250,000

250 comma 000250,000

250 comma 000250,000

Annual fixed cost

$ 150 comma 000$150,000

$ 225 comma 000$225,000

$ 525 comma 000$525,000

Per unit variable cost

$ 15.00$15.00

$ 14.00$14.00

$ 13.00$13.00

The option GPE is best when the contracted volume is below

nothing

units (enter your response as a whole number).

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