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 increasednext 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). Thecost data followAnnual contracted unitsAnnual fixed costPer unit variable costGeneral-PurposeEquipment (GPE)75,000$100,000$16.00Flexible ManufacturingSystem (FMS)75,000$225,000$14.00DedicatedMachine (DM)75,000$450,000$13.75Based 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 now volume is

Total cost decision-making is a process of analysing and comparing the costs of several…

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

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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Ritz Products's materials manager, Tej Dhakar, must determine whether to make or buy a new semiconductor for the wrist TV that the firm is about to produce. Three million units are expected to be produced over the life cycle. If the product is made, start-up and production costs of the make decision total $1 million, with a probability of 0.5 that the product will be satisfactory and a 0.5 probability that it will not. If the product is not satisfactory, the firm will have to reevaluate the decision. If the decision is reevaluated, the choice will be whether to spend another $1 million to redesign the semiconductor or to purchase. Likelihood of success the second time that the make decision is made is 0.8. If the second make decision also fails, the firm must purchase. Regardless of when the purchase takes place, Dhakar's best judgment of cost is that Ritz will pay $0.40 for each purchased semiconductor plus $2 million in vendor development cost. a) Assuming that Ritz…
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