Using the data in problem 7.5, determine the economical volume for each process.
In problem 7.5, 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. Meile 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:

Which process is best for thiscontract?

General- Flexible Purpose Manufacturing Dedicated (FMS) 200,000 Equipment Syste Machine (GPE) (DM) Annual contracted 200,000 Annual fixed co $100,000 $200,000 $500,000 units 200,000 Per unit variable cost 15.00 S 14.00 13.00