Question
Meile Machine Shop, Inc., has a 1-year contract to produce 200,000 gear housings for a new off-road vehicle. Owner Larry Meilehopes the contract will be
Meile Machine Shop, Inc., has a 1-year contract to produce 200,000 gear housings for a new off-road vehicle. Owner Larry Meilehopes 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:
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GENERALPURPOSE
EQUIPMENT (GPE)
Annual contracted units
200,000
Annual fixed cost
$100,000
Per unit variable cost
$ 15.00
FLEXIBLEMANUFACTURING
DEDICATED
_SYSTEM (FMS}
MACHINE(DM)
200.000
200,000
$200,000
$500.000
$ 14.00
$ 13.00
Which process is best for this contract?
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Contemporary Logistics
Authors: Paul R. Murphy, Michael Knemeyer
11th edition
132953463, 2900132953466, 978-0132953467
