Borges Machine Shop, Inc., has a 1-year contract for the production of 225,000 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:
Borges Machine Shop, Inc., has a 1-year contract for the production of 225,000 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:
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Borges Machine Shop, Inc., has a 1-year contract for the production of
225,000
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:|
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General-Purpose Equipment (GPE)
|
Flexible Manufacturing System (FMS)
|
Dedicated Machine (DM)
|
|
Annual contracted units
|
225,000
|
225,000
|
225,000
|
|
Annual fixed cost
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$150,000
|
$250,000
|
$525,000
|
|
Per unit variable cost
|
$18.00
|
$14.00
|
$13.00
|
Part 2
The option GPE is best when the contracted volume is below
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units (enter your response as a whole number).Expert Solution
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