CHAPTER 7 TECHNICAL CASE

Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housing for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increase next year. Borges has developed costs for three alternatives - these are general-purpose equipment (GPE), flexible manufacturing system (FMS) and expensive but efficient dedicated machine (DM). The costs are as follows:

	GPE	FMS	DM
ANNUAL CONTRACTED UNITS TO BE PRODUCED	200,000	200,000	200,000
ANNUAL FIXED COSTS	$100,000	$200,000	$500,000
PER UNIT VARIABLE COSTS	$15.00	$14.00	$13.00

1. Prepare a GRAPH showing the FIXED COSTS, TOTAL COSTS (VARIABLE COSTS X QUANTITIES), and CROSSOVER POINTS for each process and each volume.