Assignment:
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:
|
|
General-purpose Equipment (GPE)
|
Flexible Manufacturing System (FMS)
|
Dedicated Machine (DM)
|
|
Annuals contracted units
|
225,000
|
225,000
|
225,000
|
|
Annual fixed cost
|
$1,25,000
|
$2,50,000
|
$5,25,000
|
|
Per unit variable cost
|
$16.00
|
$14.50
|
$13.50
|
Based on the cost, the process that is best suited for the current contracted volume is