Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 75,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the
Borges Machine Shop, Inc., has a 1-year contract for the production of
75,000
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 | 75,000 | 75,000 | 75,000 |
| Annual fixed cost | $150,000 | $250,000 | $480,000 |
| Per unit variable cost | $18.00 | $14.00 | $13.00 |
Part 2
Based on the total cost, the process that is best suited for the current contracted volume is _____.
Suppose the contracted volume changes to 275,000 gear housings. Based on the total cost, the process that is best suited for the new volume is ______.
Suppose the contracted volume changes to 375,000 gear housings. Based on the total cost, the process that is best suited for the new volume is _______.
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts