Borges Machine Shop, Inc., has a 1-year contract for the production of 75,000 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:

1. Based on the total cost, the process that is best suited for the current contracted volume is

a. General Purpose Equipment (GPE)

b. Flexible Manufacturing System (FMS)

c. Dedicated Machine (DM)

2. Suppose the contracted volume changes to 275,000 gear housings. Based on the total cost, the process that is best suited for the new volume is

a. GPE

b. FMS

c. DM

3. Suppose the contracted volume changes to 375,000 gear housings. Based on the total cost, the process that is best suited for the new volume is

a. GPE

b. FMS

c. DM

\begin{tabular}{lccc} \hline & General-Purpose Equipment (GPE) & Flexible Manufacturing System (FMS) & Dedicated Machine (DM) \\ \hline Annual contracted units & 75,000 & 75,000 & 75,000 \\ Annual fixed cost & $150,000 & $200,000 & $525,000 \\ Per unit variable cost & $16.00 & $14.50 & $13.75 \\ \hline \end{tabular}