Question: LO Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehi- cle. Owner Luis Borges

LO Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehi- cle. 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 efli- cient, dedicated machine (DM). The cost data follow: GENERAL PURPOSE EQUIPMENT (GPE FLEXIBLE MANUFACTURING SYSTEM FMS) DEDICATED MACHINE (DMD fo 50 re Di of Annual contracted units Annual fixed cost Per unit variable cost 200,000 $100,000 200,000 $200,000 200,000 $500,000 nal is $ 15.00 $ 14.00 $ 13.00 IS Which process is best for this contract SON

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