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Assignment 3 1. Meile Machine Shop, Inc., has a 1-year contract for the production of 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 FLEXIBLE DEDICATED EQUIPMENT (GPE) MANUFACTURING MACHINE SYSTEM (FMS) (DM) Annual contracted units 200,000 200,000 200,000 Annual fixed cost $100,000 $200,000 $500,000 Per unit variable cost $ 15.00 $ 14.00 $ 13.00 Which process is best for this contract? 2. California Gardens, Inc., prewashes, shreds, and distributes a variety of salad mixes in 2- pound bags. Doug Voss, Operations VP, is considering a new Hi-Speed shredder to replace the old machine, referred to in the shop as "Clunker." Hi-Speed will have a fixed cost of $85,000 per month and a variable cost of $1.25 per bag. Clunker has a fixed cost of only $44,000 per month, but a variable cost of $1.75. Selling price is $2.50 per bag. a) What is the crossover point in units (point of indifference) for the processes? b) What is the monthly profit or loss if the company changes to the Hi-Speed shredder and sells 60,000 bags per month? c) What is the monthly profit or loss if the company stays with Clunker and sells 60,000 bags per month