ABC Machine Shop, Inc., has one-year contract for production of 48,000 gear housings for new off-road vehicle. ABC hopes that the contract will be extended and production volume rose in the prospect. ABC is considering 3 different production technologies: general-purpose equipment (GPE), flexible manufacturing system (FMS), and the expensive, but efficient, option of dedicated machine (DM). The annual fixed and for each unit variable costs for three alternatives are tabulated below:
|
GPE
|
FMS
|
DM
|
|
Annual fixed cost
|
$260,000
|
$590,000
|
$810,000
|
|
Per unit variable cost
|
$13
|
$8
|
$4
|
What is cheapest cost for meeting current order for 48,000 units? Identify only the amount. e.g. 3500000