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 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, dedicate machine (DM). The cost data follow: If the contract for the second and third years is pending, for demand below 100,000 units, option is the best alternative for Luis. For demand above 325,000 units, option is the best alternative for Luis

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