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Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. 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 efficient, dedicated machine (DM). The cost data follow: General-Purpose Equipment (OPE) 200,000 200,000 Annual contracted units Annual fixed cost Per unit variable cost $125,000 $16.00 $200,000 $14.00 If the contract for the second and third years is pending, for demand below 37,500 units, option FMS is the best alternative for Luis is the best alternative for Luis. For demand above 280,000 units, option Flexible Manufacturing System (FMS) Dedicated Machine (DM) 200,000 $480,000 $13.00

Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. 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 efficient, dedicated machine (DM). The cost data follow: General-Purpose Equipment (OPE) 200,000 200,000 Annual contracted units Annual fixed cost Per unit variable cost $125,000 $16.00 $200,000 $14.00 If the contract for the second and third years is pending, for demand below 37,500 units, option FMS is the best alternative for Luis is the best alternative for Luis. For demand above 280,000 units, option Flexible Manufacturing System (FMS) Dedicated Machine (DM) 200,000 $480,000 $13.00

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. 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 efficient, dedicated machine (DM). The cost data follow: General-Purpose Equipment (GPE) Flexible Manufacturing System (FMS) Dedicated Machine (DM) 200,000 Annual contracted units Annual fixed cost Per unit variable cost $125,000 $16.00 If the contract for the second and third years is pending, for demand below 37,500 units, option FMS is the best alternative for Luis. For demand above 280,000 units, option is the best alternative for Luis 200,000 $200,000 $14.00 200,000 $480,000 $13.00
Transcribed Image Text:Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. 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 efficient, dedicated machine (DM). The cost data follow: General-Purpose Equipment (GPE) Flexible Manufacturing System (FMS) Dedicated Machine (DM) 200,000 Annual contracted units Annual fixed cost Per unit variable cost $125,000 $16.00 If the contract for the second and third years is pending, for demand below 37,500 units, option FMS is the best alternative for Luis. For demand above 280,000 units, option is the best alternative for Luis 200,000 $200,000 $14.00 200,000 $480,000 $13.00
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