Finding the best manufacturing process


Assignment:

Meile Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off road vehicle. Owner Larry Meile hopes the contract will be extended and the volume increased next year. Meile 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:

OPTION 1 ( GPE)

Annual contracted units 200,000
Annual Fixed Cost $ 100,000
Per unit variable cost 15.00

OPTION 2 ( FMS)

Annual contracted units 200,000
Annual Fixed Cost $ 200,000
Per unit variable 14.00

OPTION 3 ( DM)

Annual contracted units 200,000
Annual Fixed Cost $ 500,000
Per unit variable cost 13.00

Using the data in Problem, determine the best process for each of the following volumes: (1) 75,000, (2) 275,000 and (3) 375,000

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