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Perry Equipment & Assoc., Inc. has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Adam Perry hopes
Perry Equipment & Assoc., Inc. has a 1-year contract for the production of 200,000 gear housings for a new off-road vehicle. Owner Adam Perry hopes the contract will be extended and the volume increased next year. Perry 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 follows: GPE FMS DM Annual fixed cost (S) Per unit variable cost (S) 100,000 200,000 500,000 20 19 18 a. Under which production range is each process appropriate? b. Which process is best for this contract? c. Does your decision change if the per unit variable cost for DM increases to $21? d. Determine the best process for each of the following volumes: () 75,000; (ii) 275,000; and, ii) 375,000 e. If a contract for the second and third years is pending, what are the implications for process selection
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