ABC Machine Shop, Inc., has a 1-year contract for the production of 48,000 gear housings for a new off-road vehicle. ABC hopes that the contract will be extended and the production volume increased in the future. ABC is considering three different production technologies: general-purpose equipment (GPE), flexible manufacturing system (FMS), and the expensive, but efficient, option of a dedicated machine (DM). The annual fixed and per unit variable costs for the 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 the cheapest cost for meeting the current order for 48,000 units? Specify only the amount. e.g. 3500000