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 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) Annual contracted units 75,000 Flexible Manufacturing System (FMS) 75,000 Dedicated Machine (DM) 75,000 Annual fixed cost $125,000 $200,000 $480,000 Per unit variable cost $18.00 $14.75 Based on the total cost, the process that is best suited for the current contracted volume is $13.50
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 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) Annual contracted units 75,000 Flexible Manufacturing System (FMS) 75,000 Dedicated Machine (DM) 75,000 Annual fixed cost $125,000 $200,000 $480,000 Per unit variable cost $18.00 $14.75 Based on the total cost, the process that is best suited for the current contracted volume is $13.50
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Transcribed Image Text: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 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)
Annual contracted units
75,000
Flexible Manufacturing
System (FMS)
75,000
Dedicated
Machine (DM)
75,000
Annual fixed cost
$125,000
$200,000
$480,000
Per unit variable cost
$18.00
$14.75
Based on the total cost, the process that is best suited for the current contracted volume is
$13.50
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