Question
Borges Machine Shop, Inc., has a 1-year contract for the production of 250,000 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
250,000
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 | 250,000 | 250,000 | 250,000 |
Annual fixed cost | $125,000 | $250,000 | $525,000 |
Per unit variable cost | $15.00 | $14.00 | $13.00 |
The option GPE is best when the contracted volume is below
nothing
units (enter your response as a whole number).
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