K Meile Machine Shop, Inc., has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Larry Meile hopes the contract will be extended and the volume increased next year. Meile 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 Annual contracted units 200,000 System (FMS) 200,000 Dedicated Machine (DM) 200,000 $150,000 $500,000 $18.00 $13.00 Annual fixed cost Per unit variable cost Based on the cost, the process that is best suited for the current contracted volume is $250,000 $14.50