Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Borges Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housing 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 housing for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increase next year. Borges has developed costs for three alternatives - these are general-purpose equipment (GPE), flexible manufacturing system (FMS) and expensive but efficient dedicated machine (DM). The costs are as follows: GPE FMS DM ANNUAL CONTRACTED UNITS TO BE PRODUCED 200.000 200,000 200,000 ANNUAL FIXED COSTS $100,000 $200,000 $500,000 PER UNIT VARIABLE COSTS $15.00 $14.00 $13.00 [NOTICE: Units remain the same but fixed costs increase with the cost of the equipment but per unit costs decrease due to the increased efficiency of the equipment] As the consultant, you need to: 1. Determine the most economical volume for each process 2. Determine the best process for each of the following volumes: 1. 75,00 2. 275,000 3. 375,000 3. If a contract for the second and third years is pending, what the implications for process selection? Write out your work for each, show the answer, and prepare a one page summary that answers each of the questions
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started