Borges Machine Shop, Inc., has a 1-year contract for the production of 75,000 gearboxes for a new
Question:
Borges Machine Shop, Inc., has a 1-year contract for the production of 75,000 gearboxes for a new off-road vehicle. Owner Luis Borges expects the contract to be extended and volume to increase next year. Borges has developed costs for three alternatives. They are general purpose equipment (GPE), flexible manufacturing systems (FMS) and expensive but efficient dedicated machines (DM). The cost data follows:
General Purpose Equipment (GPE) | Flexible Manufacturing System (FMS) | Dedicated machine (DM) | |
contracted annual units | 75,000 | 75,000 | 75,000 |
annual fixed cost | $100,000 | $250,000 | $500,000 |
Variable cost per unit | $15.00 | $14.75 | $13.50 |
Based on the total cost, the process that best fits the current contracted volume is ?
Suppose the contracted volume changes to 275,000 gearboxes. Based on the total cost, the most appropriate process for the new volume is ?
Suppose the contracted volume changes to 375,000 gearboxes. Based on the total cost, the most appropriate process for the new volume is ?
Expert Answer:
To determine the process that best fits the contracted volume we need to calculate the total cost fo... View the full answer
