Question: Borges Machine Shop, Inc., has a 1-year contract for the production of 225.000 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 225.000 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 Flexible Manufacturing Dedicated Equipment (GPE) System (FMS) Machine (DM) Annual contracted units 225,000 225,000 225,000 Annual foced cost $150,000 $225,000 $480.000 Per unit variable cost $15.00 $14.00 $13.50 Based on the cost the process that is best suited for the current contracted volume is DM FMS GPE

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