Question: Borges Machine Shop, Inc., has a 1-year contract for the production of gear housings for a new off-road vehicle. Owner Luis Borges hopes the contract
Borges Machine Shop, Inc., has a 1-year contract for the production of 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)Annual contracted units 225,000 Annual fixed cost 125,000 Per unit variable cost $15
Flexible Manufacturing System (FMS) Annual contracted units 225,000 Annual fixed cost 200,000 Per unit variable cost $14
Dedicated Machine (DM) Annual contracted units 225,000 Annual fixed cost 525,000 Per unit variable cost $13
The option GPE is best when the contracted volume is below ____ 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).
The option DM is best when the contracted volume is over ____ units (enter your response as a whole number).
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