Borges Machine Shop, Inc., has a 1-year contract for the production of 75,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended and thevolume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and expensive, butefficient, dedicated machine (DM) The cost data followGeneral PurposeEquipment (GPE)Flexible ManufacturingSystem (FMS)75,000$125,000$15.00Annual contracted unitsAnnual fixed costPer unit vanable costBased on the total cost, the process that is best suited for the current contracted volume isSuppose the contracted volume changes to 275,000 gear housings. Based on the total cost, the process that is best suited for the new volume isSuppose the contracted volume changes to 375,000 gear housings. Based on the total cost, the process that is best suited for the new volume isDedicatedMachine (DM)75,000$225,000$14.0075,000$525,000$13.75GPEFMSDM

Calculation of process suitable for current contract volume and new volume are as follows

Answered: Borges Machine Shop, Inc, has a 1-year…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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