Question
Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the
Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 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) | |
| Annual contracted units | 200,000 | 200,000 | 200,000 |
| Annual fixed costs | $100,000 | $200,000 | $500,000 |
| Per unit variale cost | $15.00 | $14.00 | $13.00 |
What is the crossover point between GPE and FMS?
What is the crossover point between FMS and DM?
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Operations Management Creating Value Along the Supply Chain
Authors: Roberta S. Russell, Bernard W. Taylor
7th Edition
9781118139523, 0470525908, 1118139526, 978-0470525906
