Instructions

$1.$ Carefully answer each question below.

$2.$ Save this completed assignment as YourLastName$\_$FirstInitial$\_$Assmt$3$

$3.$ Submit your completed document to the eConestoga dropbox for this assignment on or before Saturday $11$:$59$ pm of the week of Module $11.$

Questions

$1.$ Meile Machine Shop, Inc., has a $1-$year contract to produce $200,000$ gear housings for a new off$-$road vehicle. Owner Larry Meile 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:

GENERALPURPOSE

EQUIPMENT $($GPE$)$ FLEXIBLE MANUFACTURING

SYSTEM $($FMS$)$ DEDICATED

MACHINE $($DM$)$

Annual contracted units $200,000200,000200,000$

Annual fixed cost $$100,000$ $$200,000$ $$500,000$

Per unit variable cost $ $15\mathrm{.}00$ $ $14\mathrm{.}00$ $ $13\mathrm{.}00$

Which process is best for this contract? $(3$ marks$)$

$2.$ Distinguish between design capacity and effective capacity. $(1$ mark$)$

$3.$ What is efficiency? $(1$ mark$)$

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$4.$ An electronics firm is currently manufacturing an item that has a variable cost of $$\mathrm{.}50$ per unit and a selling price of $$1\mathrm{.}00$ per unit. Fixed costs are $$14,000.$ Current volume is $30,000$ units. The firm can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $$6,000.$ Variable cost would increase to $$\mathrm{.}60,$ but volume should jump to $50,000$ units due to a higher$-$quality product.

Should the company buy the new equipment? $(3$ marks$)$

$5.$ What are the advantages and disadvantages of product layout, and process layout? $(2$ marks$)$